Union Budget 2026 Explained: Key Highlights Every Indian Should Know

The Union Budget 2026 was presented on 1 February 2026 by Mrs. Nirmala Sitharaman the Finance Minister of India. It charts out the fiscal path for India for the upcoming financial year. This budget is investment-heavy with focus on economic growth through fiscal consolidation, and strategic scaling-up of the manufacturing sector.

The Union Budget 2026 is key in securing India’s position as one of the fastest-growing major economies despite global and geopolitical instability, and uncertain global financial markets.

These are some of the key take-aways of the Union Budget 2026:

1. Boosting manufacturing in 7 key sectors
2. Scaling-up productivity in legacy industrial sectors
3. Championing MSMEs to reinforce the economy’s backbone
4. Pushing infrastructural development across the nation
5. Ensuring long-term economic and financial security and stability
6. Boosting “City economic regions” to amplify urban development

Let us further explore sector-wise budget changes and their real-world impact for the India:

1. Capital Expenditure and Infrastructural Development

The capital expenditure of the government has been increased to INR 12.2 lakh crore, securing a double-digit yearly increase over time. The main priority has been given to infrastructural development in:

1. Roads and highways
2. Railways and logistics
3. Focus on renewable energy
4. Developing urban infrastructure

The ultimate goal is to develop public infrastructure to boost economic growth, support employment and productivity while attracting private investment in the sector.

2. Fiscal Deficit and Borrowing

The government is aiming for gradual fiscal consolidation to ensure that the fiscal deficit is on a downward path. In this way, the government can ensure macroeconomic stability while balancing growth. Fiscal deficit is:

1. Targeted at 4.3% of the total GDP
2. Market borrowing is pegged at INR 17.2 lakh crore

Through these measures the government can ensure investor confidence in the Indian economy while also combating inflationary pressures.

3. Personal Income Tax

The Union Budget 2026 shows fiscal caution by retaining the current personal income tax slabs by:

1. No further reduction in personal income tax slabs
2. The existing tax slabs will continue for salaried tax payers
3. No announcement of slab restructuring

This will ensure that the government is able to retain deficit control in the economy by reducing consumption which would have skyrocketed if new tax cuts had been introduced.

4. Securities Transaction Tax (STT) on Derivatives

The tax base in derivatives trading has been increased to ensure regulatory caution by discouraging excessive speculation in high-frequency trading. This is done through:

1. Increasing SST on futures and options to 0.05%
2. This will be applied to derivatives traded on all recognised stock exchanges

This will benefit cash-market investors as this increase will not impact them at all, while creating a safeguard for investors in a highly speculative section of the market. Candidates MBA in Finance and Economics can analyse this move as a part of their coursework to further understand the ever-evolving stock markets in terms of taxation.

5. Semiconductor Manufacturing

There is a drastic shift towards boosting semiconductor manufacturing in lieu of the India Semiconductor Mission (ISM) 2.0 by increasing the outlay to INR 40,000 crore. This boost will focus on:

1. Fabrication of semiconductors
2. Protecting intellectual property
3. Boosting manufacturing of equipment and materials
4. Ensuring resilience of supply-chain to ensure timely delivery

This move will ensure the transition to high-value tech development from assembly-led manufacturing of electronics. It will drastically reduce dependence on imports and instead boost India as a leader in international semiconductor supply chains.

6. Healthcare and Pharmaceutical Sector

The healthcare and pharma sector has received a huge boost in the Union Budget 2026 with the allocation of INR 10,000 crore for the “Biopharma SHAKTI” program for 5 years to:

1. Boost domestic biopharma manufacturing
2. Boost research and innovation in biopharma industry

Life-saving cancer drugs and rare-disease drugs have been exempted from customs duty. This is done to ensure short-term affordability while boosting long-term manufacturing and research in pharma.

7. Education Sector

The Union Budget 2026 is focused on ensuring female participation in the education sector with:

1. Every district to have at least one girls’ hostel
2. 5 new university townships have been announced
3. Boosting access to higher education with focus on student housing

Female students will now have access to top engineering and technology management programs at leading universities with this move.

8. Trade, Imports, and Exports

Trade, customs, and exports have witnessed greater focus in the Union Budget 2026 to boost exports and trade with:

1. Revision of custom duty structures
2. Ensuring duty-free exports of seafood processing and leather goods
3. Implementing digital cargo clearance systems for smoother supply chains

These measures are to minimise the tariffs implemented on Indian goods and to improve export competitiveness in the global markets.

Overall Impact on India

As the Indian GDP growth is expected to top the charts globally, the Union Budget 2026 creates a long-term framework for growth through:

• Investment-driven growth instead of consumption-driven stimulation
• Controlled borrowing that translates into fiscal discipline
• Ensuring self-reliance in key industries
• Strategic development of human capital
• Boosting the healthcare sector with research and development

All these measures, combined with the India-EU Trade Deal signed last month, will strengthen the Indian economy, boost exports, ensure growth of human capital, and strengthen the foundations for strategic and sustainable economic development.