Finance Minister Nirmala Sitharaman made history on February 1, 2026, by presenting the Union Budget for the ninth consecutive year. This marks the third full-fledged financial budget of the Modi government’s third term and represents a significant milestone in India’s parliamentary history.
For FY27, the government has raised capital expenditure to Rs 12.2 lakh crore, up from Rs 11.2 lakh crore in FY26, reinforcing its commitment to an infrastructure-led growth strategy.
The budget also unveiled several major strategic initiatives, including a new Biopharma Hub, an expanded electronics manufacturing outlay, Semiconductor Mission 2.0, rare earth corridors, a container manufacturing push, mega textile parks, and a new SME growth fund.
Let’s take a closer look at the key announcements and sectoral highlights of Union Budget 2026.
Key Highlights
- Capital expenditure for FY27 raised to Rs 12.2 lakh crore from Rs 11.2 lakh crore, reinforcing the infra-led growth path.
- India Semiconductor Mission 2.0 launched with a Rs 40,000 crore outlay to accelerate domestic chip production.
- Content creator labs to be set up in 15,000 schools, alongside five university townships near major industrial corridors.
- High-level banking committee proposed to support the Viksit Bharat roadmap.
- New Portfolio Investment Scheme introduced to enhance capital market flows.
- Dedicated programme for high-quality sports goods manufacturing and R&D.
- Rs 20,000 crore allocated for cross-sector carbon capture and utilisation, targeting industries like steel and cement.
- Tax holiday until 2047 for foreign companies providing cloud services globally using data centres in India.
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Key Sectoral Announcements
Biopharma Shakti: India’s Global Ambition
To position India as a global biopharma manufacturing hub, the FM proposed the ‘Biopharma Shakti’ scheme with an outlay of Rs 10,000 crore over the next five years.
This includes:
- Setting up three new NIPERs and upgrading seven existing ones.
- Establishing a network of 1,000 accredited clinical trial sites to boost domestic production of biologics and biosimilars.
Relief for the IT Sector
The safe harbour margin for all IT services, including software, ITeS, KPO, and R&D, will now be 15.5%. The threshold for availing safe harbour has increased from Rs 300 crore to Rs 2,000 crore, with approvals processed via an automated, rule-driven system, reducing direct tax officer intervention.
Semiconductor Mission 2.0
Building on the success of the first phase, ISM 2.0 will focus on:
- Producing equipment and materials.
- Developing full-stack Indian IP.
- Strengthening the semiconductor supply chain.
Boost for Bond Markets
- Corporate bond market: Introduction of a new market-making framework with access to funds and derivatives.
- Municipal bonds: Large cities issuing bonds exceeding Rs 1,000 crore will be incentivised with Rs 100 crore.
Container Manufacturing Push
To address logistics needs, a new container manufacturing scheme has been proposed with a capital outlay of Rs 10,000 crore over the next five years.
Rare Earth Corridors
To support mineral-rich states like Odisha, Kerala, and Andhra Pradesh, rare earth corridors will be established to promote mining, research, and production of permanent magnets.
Infrastructure: High-Speed Rail Corridors
Seven high-speed rail corridors have been proposed to promote environmentally sustainable passenger systems and connect India’s economic hubs:
- Mumbai-Pune
- Pune-Hyderabad
- Hyderabad-Bengaluru
- Hyderabad-Chennai
- Chennai-Bengaluru
- Delhi-Varanasi
- Varanasi-Siliguri
These routes, dubbed ‘growth connectors’, aim to cut travel time and support regional development across financial and manufacturing hubs.
Ease of Living: Customs Duty Relief
- To ease living costs for citizens, the FM rationalised customs duty:
- Tariff on personal-use dutiable goods reduced from 20% to 10%.
- Basic customs duty exempted on 17 critical cancer drugs and medicines for 7 rare diseases.
Read Also: Union Budget 2026: New Income Tax Act, TCS Relief and Compliance Reforms
Wrapping Up
Union Budget 2026 reinforces the government’s long-term vision of a developed India by balancing heavy infrastructure spending with strategic bets on future technologies like semiconductors and biopharma.
With the fiscal deficit target on track at 4.3% for FY27, and targeted relief for MSMEs and healthcare, the budget aims to sustain high growth while ensuring macroeconomic stability. Initiatives such as high-speed rail corridors and rare-earth corridors signal a determination to build a self-reliant, globally competitive economy.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
