Union Budget 2026-27: Summary & Analysis

Context: Presented by Finance Minister Nirmala Sitharaman (Record 9th consecutive budget) on February 1, 2025.

1. Macroeconomic Fundamentals

Capital Expenditure (Capex) vs. Revenue Expenditure

• Concept:

  • Revenue Expenditure: Recurring expenses that do not create assets (e.g., salaries, pensions, subsidies).
    

  • Capital Expenditure (Capex): Spending that creates assets or reduces liabilities, leading to future economic benefits (e.g., building ports, bridges, roads). It has a high multiplier effect on the economy.
    

• Budget Estimates:

  • Capex Target: Set at ₹12.2 Lakh Crore (increased from ₹11.2 Lakh Crore previously).

The "Three Kartavyas" (Duties)

The Budget outlines three core duties for the government:

1. Economic Growth: Accelerate and sustain growth by enhancing productivity and competitiveness.
   

2. Aspirations & Capacity: Fulfill Indian people's aspirations and build their capabilities.
   

3. Equitable Access: Ensure every community, region, and sector has access to resources, amenities, and opportunities for meaningful participation.

2. Fiscal Federalism: 16th Finance Commission

Constitutional Basis: Article 280 (Distribution of net tax proceeds between Center and States).

• Vertical Devolution: The Centre has accepted the recommendation to keep the share of states in central taxes at 41%.
  

• Horizontal Devolution (Criteria for distributing funds among states): The formula has been tweaked to benefit Southern states (TN, Kerala, AP, Telangana, Karnataka) slightly.

(Note: Income Distance generally carries the highest weight to support poorer states).

3. Taxation & Financial Sector

Direct Taxes

• New IT Act: A new Income Tax Act, 2025 will replace the existing Income Tax Act of 1961.

  • Effective Date: April 1, 2026.

  • Objective: To make tax laws lucid, concise, and easy for laymen to understand.
    

• Securities Transaction Tax (STT):

  • Definition: A direct tax levied on the purchase and sale of securities (shares, bonds, derivatives) on stock exchanges.
    

  • New Rates: Increased significantly to curb speculation.

    • Futures: Increased by 150%.

    • Options: Increased by 50%.

Indirect Taxes (Customs)

• Definition: Duty levied on imports (and sometimes exports) when goods cross international borders.
  

• Changes:

  • Critical Minerals: Customs duty reduced to Nil for minerals like Monazite and those used in renewable energy.
    

  • Objective: To reduce import costs and promote domestic processing.

Banking

• Committee: A high-level committee on "Banking for Viksit Bharat" will be set up to strategize lending and financial inclusion.

4. Infrastructure & Connectivity

Corridors & Waterways

• National Waterways: First-ever National Waterway to be constructed in Odisha.
  

• Industrial Corridors:

  • Integrated East Coast Industrial Corridor: Connects Durgapur (West Bengal) to other nodes.

  • Dedicated Freight Corridor: New line connecting Dankuni (West Bengal) to Surat (Gujarat) (East-West connectivity).
    

• Rare Earth Corridors: Dedicated corridors to promote mining, processing, and research of critical minerals/rare earths.
  

  • States involved: Odisha, Kerala, Andhra Pradesh, Tamil Nadu.

  • Note on Promethium: This element is excluded from the list as it is radioactive and not found in minable quantities.

Railways (High Speed)

• New Corridors: 7 new high-speed rail corridors announced to drastically reduce travel time:

  1. Mumbai – Pune (Travel time: 45 mins)

  2. Pune – Hyderabad

  3. Hyderabad – Bengaluru

  4. Hyderabad – Chennai

  5. Chennai – Bengaluru

  6. Delhi – Varanasi

  7. Varanasi – Siliguri

5. Science, Technology & Environment

Bio-Pharma Shakti Program

Allocated ₹10,000 Crore to promote two key areas:

1. Biologics: Advanced medicines derived from living cells (bacteria, yeast, animal cells) rather than chemical synthesis. They are original and complex.
   

2. Biosimilars: Safe, approved copies of biologics (similar to generics but for biological drugs). They are highly similar but not identical to the reference product.

Carbon Capture, Utilization, and Storage (CCUS)

• Allocation: ₹20,000 Crore.
  

• Concept: A suite of technologies that:

  1. Capture CO2 from large point sources (power plants, steel/cement factories).
     

  2. Utilize it as an input for other industries.
     

  3. Store it permanently in geological formations to prevent it from entering the atmosphere.

6. Social Welfare & Schemes

Employment & Labor

• New Scheme: VB-GRAM-G (Bharat Guarantee for Rozgar and Aajeevika Mission).

  • Status: Likely to replace MGNREGA.

  • Features: Provides 125 days of guaranteed employment.

  • Implementation: States given 6 months to transition after notification.
    

• Critique: Critics argue the allocation (approx. ₹95,000 Cr including MGNREGA pending dues) is insufficient compared to the estimated need of ₹2.3 Lakh Cr.

Social Justice (Divyangjan/Disabled)

• New Initiatives:

  • Divyangjan Kaushal Yojana: For skill development.
    

  • Divyangjan Sahara Yojana: For support/empowerment.
    

  • National Platform for Rights of the Disabled: To be established.

Education

• University Townships: 5 new townships to be built near major industrial corridors.
  

• STEM: Specific focus on Girls' hostels to encourage female participation in STEM (Science, Technology, Engineering, Math).

Sports

• Sports Authority of India (SAI): Budget increased to ₹917.38 Cr.

• Anti-Doping: Budget for NADA (National Anti-Doping Agency) and NDTL (National Dope Testing Lab) reduced from ₹28 Cr to ₹23 Cr.

7. Sectoral Highlights

• Textiles: Allocation increased by 25%. Includes specific schemes for Man-made fiber (National Fiber Scheme) and Handlooms.
  

• MSME: Allocation Doubled to support small enterprises.
  

• Defense: Received the highest allocation among all ministries.
  

• Justice System: ICJS (Inter-operable Criminal Justice System) budget increased to integrate Police, Courts, Jails, and Forensics data.

8. Culture & Miscellaneous

• Buddhist Circuit: Scheme to develop tourism in the North East covering Arunachal, Sikkim, Assam, Manipur, Mizoram, and Tripura.
  

• Heritage Sites: Development of archaeological sites like Dholavira, Lothal, Rakhigarhi, Adichanallur, Sarnath, Hastinapur, and Leh Palace.
  

• Renaming: Adampur Airport (Jalandhar, Punjab) renamed to Sri Guru Ravidas Airport.
  

• Important Day: February 2nd is World Wetlands Day.