Over the past decade, government policy actions have allowed the economy to combine stability with sustainable growth of around 7%, moderate inflation and a steady path of fiscal consolidation. However, even in the “golden head” phase that India is currently enjoying, risks arise from weakening multilateralism, fragmented trade, disrupted supply chains and accelerating technological change.
In this context, the Finance Minister, who presented her ninth consecutive Union Budget, the first in India’s history, should be commended for presenting a budget that balances short-term requirements with long-term goals, or, as the Economic Survey aptly puts it, ran a marathon like a sprint.
Union Budget 2026-27 Papers
Particularly notable was the formulation of the government’s economic agenda as kartavya, which signaled a shift in perspective towards governance as a statement of duty. This article focuses on the first kartuvya, namely accelerating and sustaining economic growth by increasing productivity and competitiveness while building resilience to volatile global dynamics.
With this goal in mind, the Minister of Finance announced interventions in six key areas: the expansion of production in seven strategic and frontier sectors; rejuvenation of older industries; creating MSME champions; providing strong infrastructure pressure; ensuring long-term energy security and stability; and the development of urban economic regions.
Manufacturing remains central to India’s growth strategy given its role in large-scale employment generation, export competitiveness, supply chain resilience and Atmanirbharta.
The extension of the India Semiconductor Mission to ISM 2.0 marks a decisive deepening of India’s manufacturing strategy. Moving beyond manufacturing, the mission now extends to semiconductor devices, materials, complex intellectual property and industry-led research and training, recognizing that resilience in this critical sector requires an integrated end-to-end ecosystem. This is complemented by a strong push for electronics manufacturing, including electronic components and rare earth magnets, supported by cluster-based development and the creation of dedicated rare earth corridors.
Highlights of the Union Budget 2026
Concentrated attention is also paid to the production of textiles and sporting goods, which reflects their intensity of employment and export potential. Upgraded clusters, technology upgrades and integration with global value chains are expected to help these industries move up the value ladder while supporting large-scale job creation. Targeted interventions are proposed for biopharma through Biopharma SHAKTI to position India as a global hub for biologics and biosimilars; chemicals and capital goods are similarly supported through cluster-driven and scale-oriented interventions. Together, these manufacturing initiatives are designed to achieve economies of scale, reduce import dependency and strengthen supply chain security in a more fragmented global economy.
No less important is the emphasis on the rejuvenation of old industries. Leveraging existing ecosystems is a cost-effective approach that enables maximum economic return on every rupee spent while supporting employment-intensive industries and regional industrial bases.
The strong focus on MSMEs is encouraging given their role as building blocks of a large and competitive manufacturing sector and a key source of employment. CII has consistently pushed for increased capital support to address the resource constraints faced by SMEs. The budget acknowledges these challenges and proposes a comprehensive set of measures. The creation of Champion MSMEs is supported by a concrete financial architecture, including a ₹10,000 crore SME Growth Fund, additional support for the Self-Reliant India Fund and a major overhaul of MSME liquidity mechanisms through TReDS. Better access to timely liquidity is expected to provide meaningful support to the growth and competitiveness of SMEs.
Public investment continues to serve as the macroeconomic anchor of the growth strategy. While major capital expenditure increased to ₹ 12.2 crore in 2026-27 (Be) from ₹ 10.96 crore in 2025-26 (RE), reflecting a growth of 11.5%; effective capital expenditure, which includes capital formation subsidies, is set to increase to ₹17.15 crore from ₹14 crore, an increase of 22.1%. A wide range of infrastructure projects, from dedicated freight corridors and seven new high-speed rail corridors to inland and coastal waterways, will maintain the momentum in infrastructure creation. Measures such as the proposed Infrastructure Risk Guarantee Fund directly address construction phase risks that have historically limited private participation.
Energy security
Energy security and sustainability are integrated into the growth story through a pragmatic lens. Investments in carbon capture and storage reflect a clear recognition that India’s transformation journey must address emissions in sectors that are difficult to reduce.
As Tier II and Tier III cities emerge as important economic hubs, the focus on urban economic regions represents a significant innovation. By mapping functional economic geographies and allocating ₹5,000 crore per region over five years through reform-linked funding, the budget seeks to tap agglomeration economies outside the largest metropolitan centres.
Underlying these interventions is a strong commitment to fiscal credibility. The finance minister set an ambitious consolidation path in 2021-22, when the fiscal deficit reached 9.2% of GDP during the pandemic, and pledged to reduce it to below 4.5% of GDP by 2025-26. This target has been exceeded, with the fiscal deficit estimated at 4.3% of GDP in 2026–27. The budget also introduces a new phase of fiscal management with public debt as an anchor, further strengthening macroeconomic resilience.
All in all, the first kartavya formulated in the Union Budget 2026-2027 represents a coherent and well-crafted growth strategy. By aligning manufacturing policy, infrastructure investment, MSME financing and urban development into a fiscally responsible framework, the government has sought to translate ambition into reality.
The author is the Director General of CII
Published – 01 Feb 2026 20:15 IST
