'Budget 2026 puts manufacturing, technology at centre of growth push'

Budget's priority seems to be to reinforce India's long term growth narrative while maintain a tight balancing act as far as fiscal discipline is concerned.

The Union Budget for 2026-27 was a fairly balanced one prioritising macro stability and fiscal prudence in a challenging environment over near term populism. The priority seems to be to reinforce India’s long term growth narrative while maintain a tight balancing act as far as fiscal discipline is concerned. 

First things first, for FY26–27, the government has set a fiscal deficit target of 4.3 per cent of gross domestic product (GDP), marginally lower than the previous year actual of 4.4 per cent, signalling continued fiscal consolidation in a challenging global environment. 

Gross borrowing is planned at ₹17.2 trillion, reflecting the need to fund expanded public investment while managing overall debt levels. The debt-to-GDP ratio is projected to improve to 50 per cent by FY31 from 57 per cent as on FY26, underscoring the government’s commitment to a disciplined fiscal path. 

 

Central government capex, which has been a cause of market concern for the last couple of years, witnessed a record allocation of around ₹12.2 trillion (a double digit increase over revised estimates of FY26, and is now starting to witness a gradual rebound. It underscores the government’s resolve to strengthen physical infrastructure across transport, logistics, energy and urban sectors.

 

A defining feature of the budget is its renewed focus on manufacturing and technology, anchored in the broader themes of Atma-Nirbhar Bharat  and Viksit Bharat (self-reliance). A suite of initiatives aims to reduce import dependence, build value chains, and position India as a global hub in critical sectors. 

India Semiconductor Mission 2.0 with a significant outlay to promote chip design, equipment manufacturing and supply chain resilience — a strategic area given global competition for semiconductors.Expanded schemes for electronics components, biopharma and rare earth permanent magnets, strengthening domestic capabilities in high-value sectors.  Also Read: Budget 2026 highlights: A look at key numbers announced by FM Sitharaman  

Another thing that was clearly outlines and remains a positive is that focus on infrastructure remains a priority, with initiatives across multiple fronts. Government announced seven high-speed rail corridors to improve intercity connectivity, stimulate regional growth and modernise passenger transport. Apart from this, 4 new Dedicated Freight Corridors and operationalisation of 20 new waterways to enhance logistics efficiency. 

On direct tax front, there was no announcement (on expected lines) given that focus remains on launching the new income tax act from April 1, 2026. This would be radical change towards easier compliance and transparency although it does not immediately alter tax rates/slabs. 

Amongst the few disappointments, there has been no major stimulus for increasing consumption, something that the market was already partly expecting. Given the tight fiscal situation and some of recent off budget announcements like GST rate cut, we believe that this is a temporary pause rather than a long term policy direction. 

Another announcement that is likely to be taken quite negatively by the markets is the increase in securities transaction tax (STT) on futures and options. While the overall impact on net basis is likely to be minimal hence unlikely to have a major negative impact, sentiments are likely to be hurt a little. This may cause an increased volatility in the markets in the near term. Something long term investors should note and hence build long term positions to take advantage. 

Overall, the budget was as good as could be expected given the tight fiscal position. While the lack of middle-class relief and a missing consumption stimulus may be viewed as negatives, the government has clearly prioritised fiscal prudence and the medium-term growth story. 

Overall, the Union Budget blends continuity with strategic reforms — seeking to sustain robust growth, increase localisation, modernise infrastructure, and maintain fiscal discipline in a complex global context. 

  (Disclaimer: This article is by Manish Jain, head of fund management, Centrum. Views expressed are his own.)