“Budget 2026–27: CapEx, Manufacturing, SMEs, and Inclusivity Drive India’s Growth Agenda”

By:- Dr. Manoranjan Sharma, Chief Economist, Infomerics Valuation and Rating Ltd.

The Union Budget 2026–27 aligns closely with expectations. Formulated against a backdrop of global economic uncertainty, inflationary pressures, and domestic priorities such as employment generation, manufacturing competitiveness, rural development, and fiscal consolidation, the Budget adopts a “three-Kartavya” framework—duties aimed at accelerating growth, empowering citizens, and promoting inclusivity.

Capital Expenditure and Infrastructure

The Budget increases capital expenditure to ₹12.2 lakh crore, an 8–9% rise from the previous year, earmarked for infrastructure development including transport, urban infrastructure, and regional connectivity. Given the high multiplier effect, this is a welcome move. Seven high-speed rail corridors were announced, connecting key economic hubs such as Mumbai–Pune, Pune–Hyderabad, and Chennai–Bengaluru, aimed at reducing travel time and enhancing logistics connectivity. These initiatives are expected to stimulate employment, improve productivity, and attract private investment. However, challenges remain in implementation capacity, land acquisition, cost overruns, and financing sustainability.

Tax Policy

While the Budget maintains stability in direct taxes, major changes to income tax slabs were limited. Some relief could have been provided to taxpayers. Nonetheless, procedural facilitation measures—such as staggered timelines for filing returns—and minor enhancements are expected to ease compliance.

Sectoral Priorities and Structural Reforms

A strong emphasis is placed on manufacturing promotion, including the expansion of the Semiconductor Mission (ISM 2.0), rare earth corridors, and strategic support for bio-pharma, chemicals, and textiles.

Services Sector and Global Competitiveness

The establishment of an Education-to-Employment (E2E) Standing Committee is aimed at strengthening India’s services sector, with a view to achieving a targeted global share by 2047.

MSMEs and SME Growth Fund

A dedicated ₹10,000 crore SME growth fund has been proposed to support small businesses as future job creators. While this focus will enhance long-term growth and export competitiveness, effective execution will require easier access to credit, reduced regulatory hurdles, and technology adoption—particularly for MSMEs lacking scale and capital.

Social Inclusion and Human Capital

Measures such as proposed girls’ hostels in every district, diversification of farm produce, productivity enhancement, and integration of fisheries into the market value chain are well-conceived. However, the scale of funding relative to long-standing sectoral needs—such as health systems strengthening and unemployment support—is modest, making grassroots implementation critical.

Financial Sector and Regulatory Reforms

The Budget proposes reforms to fortify the financial sector, including high-level committees for banking sector review and facilitation of foreign investment frameworks. These measures can unlock private investment and reduce systemic risks.

Overall, the Budget reflects continuity with measured change. A controlled fiscal deficit, disciplined expenditure, and CapEx-led growth are complemented by strategic support for manufacturing, technology, and SMEs to enhance global competitiveness. Inclusive measures in education, rural livelihoods, and value chains are expected to promote social equity while building the foundation for long-term, sustainable growth.