Budget FY27: With geopolitical challenges around, FM hikes defence outlay by 15.3%
Virendra Pandit
New Delhi: Giving a significant boost to India’s ongoing defence preparedness in view of the current geopolitical and security-related challenges, Finance Minister Nirmala Sitharaman on Sunday, while tabling in the Lok Sabha her 9th consecutive Union Budget for 2026-27 with a total outlay of Rs. 53.5 lakh crore, hiked the defence budget by 15.3% to a total of Rs. 7.84 lakh crore, up from Rs 6.81 lakh crore last year, the media reported.
She outlined the government’s economic direction for the next fiscal year. Her key announcements included significant changes to the income tax structure, with no tax up to Rs 12 lakh income in the new regime. The budget also focused on spurring agricultural growth, boosting manufacturing, and supporting MSMEs.
The budget placed a significant bet on Yuva Shakti and the “Orange Economy,” with major outlays for education, caregiver training, and digital content creation. Simultaneously, it pushes for strategic self-reliance via the India Semiconductor Mission 2.0 and a renewed focus on energy security, including a landmark 10-year extension for nuclear power project exemptions.
The Union Budget 2026-27 focuses on maintaining economic stability, accelerating growth (targeting ~7% GDP), and boosting manufacturing through “reform over rhetoric.”
Salient features:
- Macroeconomic Targets & Fiscal Discipline
- Fiscal Deficit: Narrowed to 4.3% of GDP (from 4.4% in FY26), aiming for long-term debt-to-GDP reduction.
- Total Size: The budget is pegged at Rs. 53.5 lakh crore.
- Growth Focus: The strategy balances high capex with fiscal consolidation, targeting a debt-to-GDP ratio of 55.6%.
- Capex and Infrastructure Drive
- Record Capital Expenditure: Raised by 9% to Rs. 12.2 lakh crore to drive infrastructure and boost manufacturing.
- High-Speed Rail: Proposal for seven new high-speed rail corridors connecting major cities (e.g., Mumbai-Pune, Delhi-Varanasi, Hyderabad-Bengaluru).
- Logistics & Waterways: Launch of a Coastal Cargo Promotion Scheme and operationalization of 20 new national waterways.
- Manufacturing and “Champion MSMEs”
- MSME Support: A new Rs. 10,000 crore SME Growth Fund established, along with Rs.4,000 crore top-up for the Self-Reliant India Fund.
- Strategic Sectors: Focus on “Biopharma SHAKTI” (Rs. 10,000 crores over 5 years), Semiconductor Mission 2.0, and electronics component manufacturing.
- Industrial Upgrades: A scheme to revive 200 legacy industrial clusters.
4. Tax Reforms and “Ease of Living”New Income Tax Act:
*New tax legislation becomes effective April 1, 2026.
- Buyback Tax: Proceeds from share buybacks will be taxed as capital gains for all shareholders, with additional tax for promoters.
- TCS Reduced: Tax Collected at Source (TCS) on overseas tour packages cut to 2%.
- STT Hiked: Securities Transaction Tax (STT) increased on futures (0.05%) and options (0.15%).
- Foreign Investment: Non-residents allowed to invest in listed Indian companies through the Portfolio Investment Scheme (PIS).
- Agriculture, Energy, and Social Focus
- AI for Agri: Launch of “Bharat-VISTAAR” to integrate AgriStack with AI systems.
- Green Energy: Rs. 20,000 crore allocated to Carbon Capture Utilization and Storage (CCUS) over 5 years.
- Social Infrastructure: Proposal to set up one girls’ hostel in every district and to upgrade Allied Health Professional institutions.
- Services Sector Boost
- Cloud Services Tax Holiday: Tax exemption until 2047 for foreign companies providing cloud services using Indian data centres.
- Tourism: Development of 15 archaeological sites and a pilot scheme to train 10,000 guides.
