What to Expect from the Union Budget 2026–27?

India’s Finance Minister, Nirmala Sitharaman, is gearing up to present her ninth straight Union Budget on Sunday, February 1, 2026, at 11 a.m. in Parliament. However, this year's budget will be more in focus, as global slowdowns, geopolitical tensions, and trade hiccups are hitting nearly every sector.

Given the persistent uncertainties in advanced economies and trade tensions, the World Bank has forecast global growth at 2.6% in 2026.

Macroeconomic Backdrop Ahead of Budget

Before discussing the expectations from the 2026–27 budget, here is a quick insight into the macroeconomic conditions:

• India’s real GDP is projected to grow at 7.4% in FY 2025–26, according to the National Statistics Office (NSO) advance estimates released earlier this month.
• Nominal GDP growth is estimated at 10.1% for the same period.
• The fiscal deficit is targeted at 4.4% of GDP in FY 2025–26, unchanged from previous targets, even as tax collections have lagged expectations in the first nine months.
• Total expenditure for FY 2025–26 is estimated at ₹50.65 lakh crore, with total receipts at ₹34.96 lakh crore. The figures exclude borrowings.
• Gross tax revenue for FY 2025–26 is budgeted at ₹42.70 trillion.

What Are the Key Expectations from the Union Budget 2026–27?

Here is what financial analysts are expecting from the upcoming Union Budget:

Fiscal Deficit and Capital Expenditure

• The budget is expected to continue fiscal consolidation. The fiscal deficit is likely to be trimmed further to 4.0–4.1% of GDP in FY27.
• Analysts project a major increase in capital expenditure to around ₹12–12.2 lakh crore in Budget 2026, up from ₹11.21 lakh crore in the current year.
• Showing strong execution, the government has already achieved about 60% of the FY26 CapEx target by November 2025.
• The government may introduce a ₹25,000 crore risk guarantee fund to give a boost to stalled infrastructure projects by making credit more accessible.
  Sectoral Budgetary Allocations
  
• The Indian Railways allocation in FY26 was around ₹2.65 lakh crore, including extra-budgetary resources of ₹10,000 crore. For FY27, capacity augmentation, network decongestion, and advanced signalling systems are expected to drive expenditure, though the year-on-year increase may remain range-bound.
• Investment via public sector undertakings and Public-Private Partnerships (PPPs) is likely to be bolstered by the risk guarantee fund and priority corridor projects.
• A large microfinance credit guarantee scheme, exceeding the ₹7,500 crore pandemic-era support, is reportedly being considered to enhance credit access for NBFCs and low-income households.

MSMEs and Export Promotion

• The government is considering an interest subvention scheme for MSMEs and exporters to help reduce their borrowing costs and make them more competitive.
• The Indian Rice Exporters’ Federation is calling for some focused financial support, like a 4% interest subsidy on export loans and rebates on freight costs, to help keep rice exports moving strong.

Telecom Sector

The Cellular Operators Association of India (COAI) seeks major cuts in regulatory levies before Budget 2026.

• Reduce the licence fee (currently 3% of Adjusted Gross Revenue, AGR) to between 0.5% and 1%, an 80–83% reduction.
• Pause contributions to the Digital Bharat Nidhi (a 5% AGR levy) until existing unutilised funds are deployed.
• COAI proposes special GST exemptions on regulatory payments such as licence fees and spectrum usage or reducing GST under the Reverse Charge Mechanism (RCM) from 18% to 5% on these transactions.
• The industry is also asking to be allowed to use their accumulated input tax credit (ITC) balances to pay GST, which would help free up cash and make managing liquidity easier.

Income Tax

• Under Budget 2025, the highest marginal rate of 30% tax applied to income above ₹24 lakh.
• For 2026, the market is expecting the 30% tax threshold to be pushed up to around ₹30 lakh, maybe even ₹35 lakh. This move could lighten the tax load for the upper middle class while bringing tax brackets more in line with inflation and rising wages.
• Standard deductions and specific reliefs for home loans or medical expenses could be introduced.

Conclusion

If you are a trader or investor, the Union Budget 2026–27 could be an interesting one to watch. Sectors like infrastructure, MSMEs, and exports might see some movement, thanks to higher capital spending and risk guarantee funds. Public projects, construction, and financial services could present opportunities.

On top of that, changes to tax thresholds and interest support may put a little extra money back in pockets, helping consumption and business liquidity. That said, with global slowdowns and trade tensions, it is wise to stay balanced and focus on areas likely to benefit from government support.

Refrences

Reuters
PRSIndia
TradeBrains
ET
Outlook Business
Fortune India
Outlook business
Business Today
The Tribune
FE