Budget 2026: Sitharaman Flags Growth, Reform and Manufacturing Push in Opening Remarks

Finance Minister Nirmala Sitharaman, presenting the Union Budget for 2026–27 on the birth anniversary of Guru Ravidas, opened her speech by highlighting India’s economic stability, fiscal discipline, and sustained growth over the past decade. She said India’s economic trajectory since the government assumed office 12 years ago has been shaped by conscious policy choices made even amid global uncertainty and disruption.

Sitharaman said India has maintained around 7% growth, alongside moderate inflation, by prioritising reforms, public investment, and domestic capacity building. She underlined the government’s focus on strengthening manufacturing, energy security, and reducing dependence on critical imports, while keeping Atmanirbharta as a guiding principle.

Growth with Inclusion and Global Integration

The finance minister said the government has sought to balance growth with inclusion, pointing to measures aimed at employment generation, agricultural productivity, household purchasing power and universal service delivery. These efforts, she said, have contributed to poverty reduction and improved living standards.

Referring to the evolving global environment, Sitharaman noted that disruptions in trade, supply chains and access to resources have intensified, while new technologies are transforming production systems and increasing pressure on water, energy and critical minerals. She said India must remain deeply integrated with global markets, export more and attract stable, long-term capital to support its expanding trade and investment needs.

Three Kartavya and the Reform Push

Sitharaman said the Budget is inspired by three Kartavya, accelerating and sustaining economic growth, fulfilling the aspirations of citizens by building their capacities, and ensuring inclusive access to resources and opportunities across regions and communities.

She described the Budget as youth-driven, drawing from ideas shared during the Lukasid Bharat Young Leaders Dialogue 2026. The government’s reform agenda, termed the “Reform Express”, has seen over 350 reforms rolled out following the Prime Minister’s Independence Day address in 2025, including GST simplification, labour code notifications and compliance rationalisation.

Six Areas Identified for Growth Push

As part of the first Kartavya, Sitharaman said the government will focus on six areas: scaling up manufacturing in seven strategic and frontier sectors, rejuvenating legacy industries, creating champion MSMEs, delivering a strong infrastructure push, ensuring long-term security and stability, and developing city economic regions.

Manufacturing Push

Detailing interventions under the first Kartavya of accelerating growth, Finance Minister Nirmala Sitharaman announced a major push to scale up manufacturing across seven strategic and frontier sectors, beginning with bio-pharmaceuticals.

She unveiled “Bio-Pharma Shakti”, a national strategy aimed at developing India as a global bio-pharma manufacturing hub, citing a shift in India’s disease burden towards non-communicable ailments such as diabetes, cancer and autoimmune disorders. Emphasising the role of biologic medicines in affordable healthcare and longevity, Sitharaman announced an outlay of ₹10,000 crore over five years for the initiative.

The strategy will focus on building a domestic ecosystem for biologics and biosimilars, including the setting up of three new National Institutes of Pharmaceutical Education and Research (NIPERs) and the upgradation of seven existing institutes. A nationwide network of 1,000 accredited clinical trial sites will also be created. She said the Central Drugs Standard Control Organisation (CDSCO) will be strengthened to meet global regulatory standards and ensure faster approvals through dedicated scientific cadres.

Semiconductors, Rare Earths and Chemicals

Building on the India Semiconductor Mission, Sitharaman announced the launch of ISM 2.0, aimed at expanding India’s semiconductor capabilities beyond fabrication to include equipment, materials, full-stack Indian intellectual property and supply-chain resilience. Industry-led research and training centres will be set up to create a skilled workforce.

She also proposed increasing the outlay for the Electronics Components Manufacturing Scheme from ₹22,919 crore to ₹40,000 crore, citing strong investment interest and commitments exceeding initial targets.

To reduce import dependence in critical materials, the finance minister announced support for rare-earth corridors in mineral-rich states including Odisha, Kerala, Andhra Pradesh and Tamil Nadu, covering mining, processing, research and manufacturing. A separate cluster-based scheme will be launched to boost domestic chemical production through three dedicated chemical parks.

Capital Goods, Containers and Infrastructure Equipment

Highlighting capital goods as a productivity driver, Sitharaman announced that high-tech tool rooms will be set up by central public sector enterprises at two locations as digitally enabled, automated service bureaus. These will support the design and manufacture of high-precision components at scale.

She also proposed a scheme to enhance domestic manufacturing of construction and infrastructure equipment, spanning products from elevators and firefighting systems to tunnel-boring machines for metros and high-altitude roads. In addition, a container manufacturing scheme with a ₹10,000 crore outlay over five years was announced to build a globally competitive ecosystem.

Textiles, Sports Goods and Legacy Clusters

For the labour-intensive textile sector, Sitharaman outlined an integrated programme covering natural, man-made and new-age fibres, modernisation of traditional clusters, a consolidated handloom and handicraft programme, the TextEco initiative for sustainable apparel, and Samarth 2.0 for skilling and technology upgrades. She also announced plans to set up mega textile parks through a challenge-mode approach.

A Mahatma Gandhi Gram Swaraj initiative was proposed to strengthen khadi, handloom and handicrafts through skilling, quality improvement, branding and global market linkages, benefiting artisans, ODOP clusters and rural youth. A dedicated initiative for sports goods manufacturing was also announced to position India as a global hub for high-quality, affordable equipment.

Separately, Sitharaman said the government will introduce a scheme to revive 200 legacy industrial clusters through infrastructure and technology upgrades to improve competitiveness.

MSMEs

Calling MSMEs a vital growth engine, the finance minister announced a ₹10,000 crore SME Growth Fund to create future champions, along with a ₹2,000 crore top-up to the Self-Reliant India Fund to support micro enterprises.

On liquidity, she said over ₹7 lakh crore has already been facilitated through the TReDS platform, and announced measures to deepen its use. These include mandating TReDS for MSME purchases by CPSEs, providing credit-guarantee support for invoice discounting, linking GeM with TReDS to improve financing access, and introducing TReDS receivables as asset-backed securities to enhance secondary-market liquidity.

To ease compliance for small businesses, Finance Minister Nirmala Sitharaman said professional bodies such as ICAI, ICSI and ICMAI will design short-term modular courses to create a cadre of “corporate mitras”, particularly in Tier II and Tier III cities. These accredited paraprofessionals will help MSMEs meet compliance requirements at affordable costs.

Capex raised to ₹12.2 lakh crore

Reiterating the government’s infrastructure push, Sitharaman said public capital expenditure has increased from ₹2 lakh crore in 2014–15 to ₹11.2 lakh crore in BE 2025–26. For FY27, capex has been raised to ₹12.2 lakh crore to sustain growth momentum.

To reduce risk for private developers, an Infrastructure Risk Guarantee Fund will be set up to provide partial credit guarantees to lenders. Asset monetisation will be accelerated through dedicated REITs for CPSU real estate.

The government will establish new dedicated freight corridors from Dankuni to Surat and operationalise 20 national waterways over five years, starting with National Waterway-5 in Odisha. Training institutes and inland ship-repair hubs, including at Varanasi and Patna, will support manpower and ecosystem development. A coastal cargo promotion scheme will be launched to raise the share of inland waterways and coastal shipping from 6% to 12% by 2047. Incentives for indigenised seaplane manufacturing and a VGF scheme for operations were also announced.

Climate Action, Urban Expansion and Financial Sector Reforms

An outlay of ₹20,000 crore over five years was proposed for carbon capture, utilisation and storage across sectors such as power, steel and cement.

Urban growth will be driven through City Economic Regions in Tier II, Tier III cities and temple towns, with ₹5,000 crore per region over five years. Seven high-speed rail corridors, including Mumbai–Pune, Pune–Hyderabad and Delhi–Varanasi, will be developed as growth connectors.

In the financial sector, a high-level committee on banking for Viksit Bharat will review reforms. Public sector NBFCs will be restructured, beginning with PFC and REC. Measures were also announced to deepen corporate bond markets, incentivise larger municipal bond issuances, and liberalise portfolio investment limits for non-resident individuals.

Tech, Services and Skills Anchor Second Kartavya

Sitharaman said technology-led growth will drive the government’s second Kartavya, fulfilling aspirations and building capacities, highlighting initiatives such as the India AI Mission, National Quantum Mission, and the Anusandhan National Research Fund. She said nearly 25 crore people have exited multidimensional poverty over the past decade.

The government will place renewed emphasis on the services sector as a key employment engine. A high-powered Education-to-Employment and Enterprises Committee will be set up to boost services-led growth, assess AI’s impact on jobs and skills, and work towards a 10% global services export share by 2047.

In healthcare, capacity will be expanded across allied health disciplines, with a target of training 10 lakh professionals over four years. A care economy programme will train 1.5 lakh caregivers in geriatric and allied services in the coming year. Five regional medical value tourism hubs will be developed with states and private partners.

Ayush initiatives include three new All India Institutes of Ayurveda, upgraded drug-testing laboratories and strengthening the WHO Global Traditional Medicine Centre in Jamnagar.

To support emerging sectors, a capital subsidy scheme will expand veterinary infrastructure, while the AVGC sector will see creator labs set up in 15,000 schools and 500 colleges. A new National Institute of Design will be established in eastern India.

Education and tourism skilling will be strengthened through five university townships near industrial corridors, girls’ hostels in every district, upgrades to key astronomy facilities, a National Institute of Hospitality, and training of 10,000 tourist guides at iconic sites.

National Destination Digital Knowledge Grid to digitally document cultural, spiritual and heritage sites, creating new jobs for local researchers, historians, content creators and technology partners.

To boost sustainable tourism, ecologically sensitive trekking and hiking trails will be developed in Himachal Pradesh, Uttarakhand, Jammu & Kashmir, Araku Valley and Pothigai Malai. Turtle trails will come up along coastal nesting sites in Odisha, Karnataka and Kerala, while bird-watching trails will be developed around Pulicat Lake in Andhra Pradesh and Tamil Nadu.

Under heritage tourism, 15 archaeological sites, including Lothal, Dholavira, Rakhigarhi, Adichanallur, Sarnath and Hastinapur, will be upgraded into experiential destinations with curated walkways, interpretation centres and immersive storytelling technologies.

India will host the first Global Big Cat Summit this year under the International Big Cat Alliance, bringing together leaders from range countries to strengthen conservation efforts.

Tourism, Sports and Rural Growth Push

In sports, a new Khelo India Mission will be launched to transform the sector over the next decade, focusing on integrated talent pathways, coach development, sports science, leagues and infrastructure.

Under the third Kartavya aligned with Sabka Saath, Sabka Vikas, the government will focus on raising farmer incomes, youth employment, mental health access, and accelerated development of the Northeast and aspirational regions. Integrated development of 500 reservoirs and Amrit Sarovars was announced to strengthen fisheries and rural livelihoods.

High-value agriculture will be promoted through targeted programmes for coconut, cashew, cocoa, sandalwood, agarwood, walnuts and almonds. A coconut promotion scheme will boost productivity, while dedicated programmes aim to make Indian cashew and cocoa globally competitive by 2030.

The Bharat Vistar multilingual AI platform will integrate AgriStack and ICAR data to provide customised advisory support to farmers. Women-led enterprises will be supported through expanded community-owned retail outlets, while targeted skilling and assistive device support schemes were announced for persons with disabilities.

Disability Support, Mental Healthcare, Northeast Push; Fiscal Deficit at 4.3%

FM announced expanded support for persons with disabilities, including scaling up the Artificial Limbs Manufacturing Corporation of India to boost production of assistive devices, invest in R&D and integrate AI. PM DivyaShas Kendras will be strengthened, and assistive technology marts will be set up as modern retail-style centres where Divyangjan and senior citizens can try and purchase products.

On mental health, Sitharaman announced the setting up of NIMHANS-II in North India and the upgradation of national mental health institutes in Ranchi and Tezpur as regional apex centres. Emergency and trauma care capacity in district hospitals will be increased by 50% through new facilities.

For the Northeast and eastern India, the government proposed development of an integrated East Coast Industrial Corridor with a major node at Durgapur, five new tourism destinations in Purvodaya states, and enhanced connectivity to Buddhist sites. A dedicated Buddhist Circuit scheme will cover Arunachal Pradesh, Sikkim, Assam, Manipur, Mizoram and Tripura, focusing on temple preservation, pilgrimage infrastructure and amenities.

Finance Commission, Fiscal Consolidation and Key Numbers

The government accepted the 16th Finance Commission’s recommendation to retain states’ vertical devolution share at 41%. Finance Commission grants of ₹1.4 lakh crore have been provided to states for FY27, covering rural and urban local bodies and disaster management.

On fiscal consolidation, the debt-to-GDP ratio is estimated at 55.6% in BE FY27, down from 56.1% in RE FY26. The fiscal deficit for FY26 was maintained at 4.4% of GDP, while FY27 is pegged lower at 4.3%.

For FY27, non-debt receipts are estimated at ₹36.5 lakh crore, total expenditure at ₹53.5 lakh crore, and net tax receipts at ₹28.7 lakh crore. Net market borrowings are estimated at ₹11.7 lakh crore, with gross borrowings at ₹17.2 lakh crore.

Sitharaman then moved to Part B of the Budget, outlining proposals on direct taxes, including the introduction of a new Income Tax Act.

Income Tax Act

Income Tax Act, 2025 set to come into force from April 1, 2026. Simplified tax rules and redesigned forms will be notified shortly, aimed at enabling ordinary taxpayers to comply without professional assistance.

As part of ease-of-living measures, interest awarded by Motor Accident Claims Tribunals to individuals will be fully exempt from income tax.

The government proposed sharp reductions in Tax Collected at Source (TCS). TCS on overseas tour packages will be cut to 2% from the current 5% and 20%, without any minimum amount condition. Similarly, TCS under the Liberalised Remittance Scheme for education and medical expenses will be reduced from 5% to 2%.

Manpower supply services will be explicitly covered under contractor payments for TDS purposes, attracting TDS of 1% or 2%, removing ambiguity. A rule-based automated mechanism will be introduced to allow small taxpayers to obtain lower or nil TDS certificates without approaching assessing officers.

Filing Timelines Eased, Fewer Procedural Hurdles

The time limit for revising returns will be extended beyond December 31 with payment of a nominal fee. Filing timelines will be staggered, with ITR-1 and ITR-2 due by July 31, while non-audit business cases and trusts will get time till August 31.

For non-resident property transactions, TDS will be deposited through the resident buyer’s TAN-based challan, eliminating the need for a separate TAN.

One-time Foreign Asset Disclosure Scheme

To address compliance challenges faced by students, young professionals and relocated NRIs, a one-time six-month foreign asset disclosure scheme will be introduced.

• Category A: Undisclosed overseas income or assets up to ₹1 crore; tax of 30% plus 30% additional tax, with immunity from prosecution.
• Category B: Assets up to ₹5 crore; immunity from penalty and prosecution on payment of a ₹1 lakh fee.

Tax and Compliance Rules to Boost IT Services, Data Centres, Manufacturing and Investment

The government announced a major overhaul of tax and compliance rules to boost IT services, data centres, manufacturing and investment inflows. All software development, IT-enabled services, KPO and contract R&D will now be grouped under a single Information Technology services category, with a uniform safe harbour margin of 15.5%. The safe harbour eligibility threshold has been sharply raised from ₹300 crore to ₹2,000 crore, with approvals to be granted through an automated, rule-based process for a five-year period.

To attract global tech investment, the finance minister proposed a tax holiday till 2047 for foreign cloud service providers using Indian data centres, subject to serving domestic customers via Indian resellers. A 15% cost-based safe harbour will apply where data centre services are provided by related entities.

In manufacturing, non-residents using bonded warehouses for component storage will get a 2% safe harbour margin, aimed at strengthening electronics and toll manufacturing. Five-year income tax exemptions were announced for non-residents supplying capital goods, tooling or expertise to bonded-zone manufacturers.

On capital markets, buybacks will now be taxed as capital gains for all shareholders, with additional tax for promoters. Securities Transaction Tax (STT) on futures and options has been increased, while MAT is proposed to become a final tax from April 1, 2026, with the rate reduced to 14%.

Customs duties will be rationalised, with exemptions withdrawn on items now manufactured domestically, and export incentives enhanced for marine, leather and textile sectors.

Customs Relief for Clean Energy, Aviation, Electronics

Finance Minister Nirmala Sitharaman announced a series of customs and trade facilitation measures in the concluding segment of Budget 2026, aimed at boosting clean energy, manufacturing, exports and ease of doing business.

To support energy transition, basic customs duty (BCD) exemption was announced on sodium antimonate used in solar glass manufacturing, while biogas blended CNG will now exclude the biogas component from excise duty calculations. BCD exemption on imports for nuclear power projects has been extended till 2035 and expanded to cover all nuclear plants, regardless of capacity. Capital goods used for processing critical minerals will also attract customs duty exemption.

In aviation, BCD has been exempted on components for civilian training aircraft, along with raw materials and parts used in aircraft maintenance for defence units. To deepen value addition in electronics, specified parts used in microwave oven manufacturing will be exempt from BCD.

As a one-time measure, manufacturing units in SEZs will be allowed to sell a limited proportion of their output in the domestic tariff area at concessional duty rates to address capacity underutilisation caused by global trade disruptions.

Major Trade and Clearance Reforms Announced

For consumers, customs duty on personal imports has been reduced from 20% to 10%, while BCD has been waived on 17 medicines, with seven more rare diseases added for duty-free personal imports of drugs and special medical foods.

The government also announced sweeping customs process reforms, including longer duty deferment for authorised economic operators, extension of advance ruling validity from three to five years, end-to-end digital clearance, expansion of electronic sealing, and phased rollout of AI-based container scanning across major ports.

Export-focused measures include duty-free treatment of fish caught by Indian vessels in the EEZ or high seas, removal of the ₹10 lakh per consignment cap on courier exports, and simplified handling of rejected consignments.

Revised baggage rules to enhance duty-free allowances and a dispute-settlement option allowing taxpayers to close cases by paying an additional amount in lieu of penalty were also announced, as the finance minister concluded her Budget speech.Budget 2026: Customs relief for clean energy, aviation, electronics; major trade and clearance reforms announced

Finance Minister Nirmala Sitharaman announced a series of customs and trade facilitation measures in the concluding segment of Budget 2026, aimed at boosting clean energy, manufacturing, exports and ease of doing business.

To support energy transition, basic customs duty (BCD) exemption was announced on sodium antimonate used in solar glass manufacturing, while biogas blended CNG will now exclude the biogas component from excise duty calculations. BCD exemption on imports for nuclear power projects has been extended till 2035 and expanded to cover all nuclear plants, regardless of capacity. Capital goods used for processing critical minerals will also attract customs duty exemption.

In aviation, BCD has been exempted on components for civilian training aircraft, along with raw materials and parts used in aircraft maintenance for defence units. To deepen value addition in electronics, specified parts used in microwave oven manufacturing will be exempt from BCD.

As a one-time measure, manufacturing units in SEZs will be allowed to sell a limited proportion of their output in the domestic tariff area at concessional duty rates to address capacity underutilisation caused by global trade disruptions.

For consumers, customs duty on personal imports has been reduced from 20% to 10%, while BCD has been waived on 17 medicines, with seven more rare diseases added for duty-free personal imports of drugs and special medical foods.

The government also announced sweeping customs process reforms, including longer duty deferment for authorised economic operators, extension of advance ruling validity from three to five years, end-to-end digital clearance, expansion of electronic sealing, and phased rollout of AI-based container scanning across major ports.

Export-focused measures include duty-free treatment of fish caught by Indian vessels in the EEZ or high seas, removal of the ₹10 lakh per consignment cap on courier exports, and simplified handling of rejected consignments.

Revised baggage rules to enhance duty-free allowances and a dispute-settlement option allowing taxpayers to close cases by paying an additional amount in lieu of penalty were also announced, as the finance minister concluded her Budget speech.

Also read: Union Budget 2026 LIVE: Finance Minister Arrives At Parliament