The Union Budget 2026–27, presented by the Finance Minister, signals a recognition of India’s growing health and care needs, driven by demographic transition, ageing population, and rising burden of diseases. However, a closer examination of allocations and priorities reveals a significant gap between stated intent and actual public investment, raising concerns about the government’s commitment to strengthening public healthcare.

Health Allocation in Union Budget 2026–27

The combined allocation for the Ministry of Health and Family Welfare and AYUSH in the Union Budget 2026–27 stands at ₹1,10,939 crore, an increase from ₹1,03,851 crore in the 2025–26 Budget Estimates.

However, after adjusting for inflation, this increase translates to only about a 3.5 per cent real-term growth. Notably, real health spending in 2026–27 remains lower than the actual expenditure in 2020–21, indicating stagnation rather than expansion of public health investment.

Key Announcements for the Health Sector in Union Budget 2026–27

SHAKTI Initiative for Biopharma and Healthcare Innovation

The Budget announced the Biopharma Strategy for Healthcare Advancement through Knowledge, Technology and Innovation (SHAKTI) initiative to strengthen India’s capacity in biologics, biosimilars, and advanced pharmaceutical research.

With an outlay of ₹10,000 crore over five years, the initiative aims to position India as a global biopharma manufacturing hub. It includes the creation of a biopharma-focused network with three new National Institutes of Pharmaceutical Education and Research (NIPERs), the upgrading of seven existing NIPERs, and the establishment of over 1,000 accredited clinical trial sites.

Expansion of Health and Care Workforce

The Budget proposes the creation of a cadre of 1.5 lakh Allied Health Professionals (AHPs) and caregivers to meet the rising demand for elderly care, long-term care, and rehabilitation services. Allied health professionals play a crucial role in diagnostics, therapy, and support services, complementing doctors and nurses, especially in a rapidly ageing society.

Strengthening AYUSH Infrastructure

The Budget announced the establishment of three new All India Institutes of Ayurveda, along with the upgradation of AYUSH pharmacies and drug testing laboratories to improve certification standards. It also proposed upgrading the WHO Global Traditional Medicine Centre, reflecting continued emphasis on traditional systems of medicine.

Medical Tourism and Public–Private Partnerships

A scheme was proposed to support States in establishing five Regional Medical Hubs through public–private partnerships. These hubs are envisioned as integrated healthcare complexes combining medical care, education, research, diagnostics, post-care, and rehabilitation. They will also include AYUSH centres and Medical Value Tourism Facilitation Centres to promote India as a global medical tourism destination.

Preventive and Wellness-Oriented Approach

The Budget reiterated the importance of preventive healthcare, wellness, lifestyle-based interventions, and integration of traditional medicine under AYUSH. However, this emphasis remains largely rhetorical, with limited clarity on funding and implementation mechanisms.

Mental Health and Trauma Care

The Budget provided for the establishment of NIMHANS-2 and the upgradation of National Mental Health Institutes in Ranchi and Tezpur as regional apex institutions, indicating recognition of the growing mental health burden.

Medical Education, Infrastructure, and Digital Health

The Budget reaffirmed support for expanding medical and allied health education capacity and strengthening select tertiary care institutions. It also continued allocations for digital health initiatives, aiming to improve efficiency and service delivery. Nevertheless, concerns persist regarding digital exclusion, data privacy, and uneven regional benefits.

Key Concerns and Issues

Declining Priority for Health Spending

Despite nominal increases, health spending as a share of GDP has declined from 0.37 per cent in 2020–21 to 0.28 per cent in 2026–27. Similarly, health’s share in the total Union Budget has fallen from 2.26 per cent to 2.07 per cent, indicating reduced fiscal priority.

Cuts to Public Health and Preventive Programmes

Core public health programmes such as the National Health Mission (NHM), PM Swasthya Suraksha Yojana (PMSSY), nutrition schemes, and health research have witnessed significant cuts. In contrast, schemes aligned with commercial and private-sector interests, particularly Pradhan Mantri Jan Arogya Yojana (PMJAY) and the Digital Health Mission, have received increased allocations despite persistent implementation challenges.

Uncertain Future of Health and Wellness Centres

Health and Wellness Centres (HWCs) are central to delivering comprehensive primary healthcare. Since they are funded under NHM, sustained cuts to NHM cast serious doubt on whether this network can expand or even function effectively.

Case Study: National Health Mission (NHM)

The NHM is the backbone of India’s public health system, covering maternal and child health, disease control, non-communicable diseases, and primary and secondary healthcare. In the 2026–27 Budget, NHM has experienced a real-term decline of nearly 8 per cent compared to 2021–22.

Actual NHM expenditure has consistently exceeded allocations, reflecting high unmet demand. NHM also supports frontline health workers such as ASHAs, who were globally recognised during the COVID-19 pandemic. Reduced funding threatens essential services like safe deliveries, immunisation, TB treatment, and programmes addressing climate change and health.

Case Study: Pradhan Mantri Jan Arogya Yojana (PMJAY)

PMJAY has emerged as a favoured programme. While ₹7,500 crore was allocated in 2024–25, actual spending was lower at around ₹6,983 crore. In contrast, the 2026–27 allocation has increased by 36 per cent compared to 2024–25.

This expansion is concerning as PMJAY is widely criticised for:

• Largely benefiting the private healthcare sector,

• Excluding many Dalits, Scheduled Tribes, and marginalised groups,

• Providing only partial financial protection, leaving households with high out-of-pocket expenditure.

Medical Tourism versus Public Healthcare

The use of public resources to support private healthcare infrastructure for wealthy foreign patients risks deepening health inequities. This comes at the expense of strengthening public healthcare systems, which remain the primary source of care for India’s poor and marginalised populations.

Way Forward: Recentring Public Healthcare

India’s health challenges require a robust, well-funded public healthcare system. Persisting with a narrow focus on insurance-based and tourism-oriented models demands serious reconsideration. The Union government must:

• Restore and expand funding for NHM and public health infrastructure,

• Ensure fair wages and social security for frontline health workers,

• Prioritise universal, free, and quality healthcare, especially for vulnerable populations.

Conclusion

While the Union Budget 2026–27 acknowledges India’s growing health and care needs, its allocations reveal a mismatch between ambition and investment. Without sustained public spending, strong primary healthcare, and equity-focused policies, India risks deepening health inequalities and undermining long-term human development. Strengthening public healthcare must therefore become a central pillar of India’s development strategy, rather than a peripheral budgetary concern.

 

The Report of the 16th Finance Commission (FC), chaired by Dr Arvind Panagariya, was recently tabled in Parliament. The Commission’s recommendations apply for the five-year period from 2026–27 to 2030–31 and aim to strengthen fiscal federalism, ensure equitable resource distribution, and promote long-term fiscal sustainability.

Constitutional Provisions Related to the Finance Commission

Article 280: Constitution of the Finance Commission

Article 280 of the Constitution mandates the President of India to constitute a Finance Commission every five years or earlier, if required. The Commission consists of a Chairperson and four other members, whose qualifications and selection process are prescribed by Parliament.

Under Article 280(3), the Finance Commission is tasked with recommending:

• The distribution of the net proceeds of taxes between the Union and the States (vertical devolution),

• The allocation of shares among States (horizontal devolution),

• The principles governing grants-in-aid to States from the Consolidated Fund of India,

• Measures to augment State resources to supplement Panchayats and Municipalities,

• Any other matter referred by the President in the interest of sound public finance.

Other Relevant Constitutional Articles

• Article 281 requires the President to lay the Finance Commission’s report before both Houses of Parliament along with an Explanatory Memorandum on actions taken.

• Article 270 provides the constitutional basis for sharing Union taxes with States.

• Article 275 authorises Parliament to provide grants-in-aid to States based on Finance Commission recommendations.

• Articles 243H and 243X empower States to authorise Panchayats and Municipalities to levy taxes and receive grants.

• Article 266 mandates that all grants recommended by the Finance Commission are charged to the Consolidated Fund of India.

Legal Framework Governing the Finance Commission

The Finance Commission (Miscellaneous Provisions) Act, 1951, enacted under Article 280(1), lays down the qualifications, terms of office, and conditions of service of Finance Commission members.

The President also has the power of reference, allowing additional fiscal matters to be referred to the Commission beyond those explicitly mentioned in Article 280.

Key Recommendations of the 16th Finance Commission (2026–31)

Share of States in Central Taxes

The 16th Finance Commission has recommended that 41 per cent of the divisible pool of central taxes be devolved to the States, maintaining the same level as the 15th Finance Commission.

The divisible pool is calculated after excluding cesses, surcharges, and the cost of tax collection from the Centre’s gross tax revenue.

Horizontal Devolution Criteria Adopted by the 16th FC

Income Distance

Income distance remains the most significant criterion, ensuring equity by allocating higher shares to poorer states. It is defined as the gap between a state’s per capita GSDP and the average per capita GSDP of the top three large states. The calculation uses averaged data from 2018–19 to 2023–24, excluding the pandemic year.

Population (2011 Census)

The Commission has continued using population data from the 2011 Census, consistent with recent Finance Commissions.

Demographic Performance

The 16th FC has redefined demographic performance by measuring population growth between 1971 and 2011, instead of relying on Total Fertility Rate (TFR). States that have successfully controlled population growth are rewarded under this criterion.

Forest Cover

The scope of the forest cover criterion has been expanded to include dense, moderately dense, and open forests. It considers both a state’s share in total forest area and the increase in forest cover between 2015 and 2023.

Contribution to GDP (New Criterion)

A new parameter introduced by the 16th FC measures a state’s contribution to national GDP, calculated using the square root of its GSDP relative to all states. This replaces the earlier tax and fiscal effort criterion and acknowledges the role of economically stronger states in driving national growth.

Grants-in-Aid Recommended by the 16th FC

The Commission has recommended ₹9.47 lakh crore in grants over five years. It has discontinued revenue deficit grants, sector-specific grants, and state-specific grants, signalling a shift toward simplified and outcome-oriented fiscal transfers.

Grants for Local Bodies

A total of ₹8 lakh crore has been recommended for local bodies:

• ₹4.4 lakh crore for rural local bodies,

• ₹3.6 lakh crore for urban local bodies.

Structure of Local Body Grants

• Basic Grants (80%): Half are untied, while the remainder are tied to sanitation, solid waste management, and water management.

• Performance-Based Grants (20%): Linked to the growth of states’ transfers to local bodies and improvements in own-source revenues.

All grants are subject to entry-level conditions, including the constitutional functioning of local bodies, timely audits, and regular constitution of State Finance Commissions.

Special Components for Urban Areas

• Special Infrastructure Grants of ₹56,100 crore for wastewater management in cities with populations between 10 and 40 lakh.

• Urbanisation Premium Grants of ₹10,000 crore as one-time assistance for peri-urban integration and rural-to-urban transition planning.

Disaster Management Grants

The Commission has recommended ₹2,04,401 crore for State Disaster Relief and Management Funds.
The Centre’s contribution will be 90 per cent for North-Eastern and Himalayan states and 75 per cent for other states.

Fiscal Roadmap and Debt Sustainability

The 16th FC has outlined a medium-term fiscal consolidation path:

• The Centre should reduce its fiscal deficit to 3.5 per cent of GDP by 2030–31.

• States should adhere to a 3 per cent of GSDP fiscal deficit limit.

A key recommendation is the strict discontinuation of off-budget borrowings, with an expanded definition of fiscal deficit and debt to include all hidden liabilities. The Commission projects that combined Centre–State debt will decline from 77.3 per cent of GDP in 2026–27 to 73.1 per cent by 2030–31.

Key Concerns Highlighted in the 16th FC Report

Vertical Devolution Imbalance

The report notes a persistent mismatch between Union revenue powers and State expenditure responsibilities. The increasing use of cesses and surcharges outside the divisible pool has reduced effective transfers to states, shrinking their fiscal space.

Horizontal Imbalances Among States

There is a widening gap between high-income and low-income states. The Commission acknowledges debates over balancing demographic responsibility with addressing deeper development deficits.

Rising Subnational Debt and Fiscal Stress

Post-pandemic debt levels of states have risen sharply, with growing reliance on off-budget borrowings and public sector undertakings. This raises concerns about long-term fiscal sustainability.

Weak Quality of Public Expenditure

Transfers often focus on the quantum of funds rather than outcomes. Monitoring of conditional grants remains weak, resulting in inefficiencies in service delivery.

Climate Change and Disaster Vulnerability

The Commission notes that disaster relief frameworks treat shocks as episodic rather than structural. Climate-vulnerable states face recurring fiscal stress, and there is no formal climate fiscal risk index.

Fiscal Weakness of Local Governments

Urban Local Bodies and Panchayati Raj Institutions remain underfunded, with weak own-revenue capacity and high dependence on tied grants, despite constitutional backing.

Structural Reform Recommendations of the 16th FC

Power Sector Reforms

States are encouraged to pursue privatisation of electricity distribution companies (DISCOMs). The Commission suggests creating a special purpose vehicle to warehouse legacy debt, with repayments linked to post-privatisation capital assistance.

Subsidy Rationalisation

The Commission has called for a review of subsidy expenditure, particularly unconditional cash transfers with weak targeting. It recommends clear exclusion criteria, standardised accounting, and an end to financing subsidies through off-budget borrowings.

Public Sector Enterprise Reforms

The report identifies 308 inactive State Public Sector Enterprises (SPSEs) for review and closure. It recommends mandatory Cabinet review for enterprises incurring losses in three out of four consecutive years.

Additional Reform Recommendations

The Commission has suggested:

• Re-examining the vertical devolution ratio and bringing more cesses into the divisible pool,

• Refining horizontal devolution by introducing multidimensional deprivation indicators,

• Incentivising debt reduction and fiscal transparency,

• Shifting towards outcome-linked transfers,

• Mainstreaming climate fiscal federalism through vulnerability-linked grants,

• Strengthening local government finance through predictable, untied grants and incentives for property tax reforms.

Conclusion

The 16th Finance Commission Report reflects a strong emphasis on fiscal discipline, transparency, environmental sustainability, and structural reforms, while maintaining equity in resource distribution. By streamlining grants, discouraging off-budget liabilities, and incentivising governance and economic performance, the Commission seeks to strengthen cooperative federalism and ensure long-term fiscal sustainability in India.

 

 

The Union Minister of Finance and Corporate Affairs presented the Union Budget 2026–27 in Parliament, marking the first Budget to be prepared in the newly inaugurated Kartavya Bhawan. The Budget has been framed as a Yuva Shakti–driven Budget, anchored in the long-term vision of Viksit Bharat.

It is guided by the principles of Action over Ambivalence, Reform over Rhetoric, and People over Populism, reflecting a shift towards decisive governance, structural reforms, and inclusive development.

The Three Kartavyas of the Union Budget 2026–27

The Budget is structured around three Kartavyas (duties) aimed at accelerating economic growth, strengthening human capabilities, and ensuring inclusive development.

1. Sustain Economic Growth

This Kartavya focuses on enhancing productivity, competitiveness, and resilience in the face of volatile global economic conditions.

2. Fulfil Aspirations

The second Kartavya aims to build the capacities of youth and citizens, enabling them to become active partners in India’s economic and social transformation.

3. Sabka Saath, Sabka Vikas

This Kartavya emphasises inclusive growth by ensuring that every family, region, community, and sector has access to opportunities, with special focus on the last mile.

First Kartavya: Accelerate and Sustain Economic Growth

Manufacturing and Industry in Strategic Sectors

To position India as a global manufacturing hub, the Budget focuses on seven strategic and frontier sectors.

Biopharma SHAKTI Mission

The Government announced the Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology and Innovation) mission with an outlay of ₹10,000 crore over five years. The mission aims to develop India into a global biopharma manufacturing centre, focusing on biologics and biosimilars.
It will be supported by the establishment of three new NIPERs, the upgradation of seven existing institutes, and the strengthening of the Central Drugs Standard Control Organisation (CDSCO) to global standards.

India Semiconductor Mission 2.0

Building on the success of ISM 1.0, the Budget announced India Semiconductor Mission (ISM) 2.0 to advance technological sovereignty. The mission focuses on manufacturing semiconductor equipment and materials, strengthening resilient supply chains, and creating industry-led R&D and training centres to develop a skilled workforce critical for economic and national security.

Electronics Components Manufacturing

The outlay for the Electronics Components Manufacturing Scheme has been increased from ₹22,919 crore to ₹40,000 crore to deepen domestic value chains and boost electronics manufacturing.

Rare Earth Corridors and Chemical Parks

The Budget proposes the establishment of Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu for mining, processing, and manufacturing of Rare Earth Permanent Magnets.
In addition, three Chemical Parks will be developed under a cluster-based, plug-and-play model to reduce import dependence.

Capital Goods and Container Manufacturing

To strengthen domestic capital goods manufacturing, the Budget announced:

• Hi-Tech Tool Rooms by CPSEs,

• A Construction and Infrastructure Equipment (CIE) Scheme, and

• A ₹10,000 crore Container Manufacturing Scheme to improve logistics and reduce import reliance.

Textile Sector Push

An Integrated Textile Programme has been launched, comprising the National Fibre Scheme, Samarth 2.0, Tex-Eco Initiative, and cluster modernisation. Mega Textile Parks will promote technical textiles, value addition, and employment generation.

Gram Swaraj and Sports Goods Manufacturing

The Mahatma Gandhi Gram Swaraj initiative aims to strengthen khadi, handloom, and handicrafts. Alongside this, a sports goods manufacturing initiative seeks to position India as a global hub for affordable and high-quality sports equipment.

Revitalisation of Legacy Industrial Clusters

A scheme has been announced to revive 200 legacy industrial clusters through infrastructure modernisation and technology upgradation to improve efficiency and cost competitiveness.

Champion MSMEs

A dedicated ₹10,000 crore SME Growth Fund will be launched to support high-potential firms and create Champion MSMEs capable of competing globally.
The Self-Reliant India Fund will receive an additional ₹2,000 crore to support micro enterprises, with Corporate Mitras envisaged as mentors to integrate MSMEs into larger value chains.

Infrastructure as Growth Connectors

High-Speed Rail Corridors

Seven High-Speed Rail corridors will be developed, including Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi, and Varanasi–Siliguri, to act as growth connectors.

Sustainable Cargo Movement

New Dedicated Freight Corridors will connect Dankuni to Surat, while 20 National Waterways will be operationalised over five years.
A Coastal Cargo Promotion Scheme will incentivise a shift towards waterways and coastal shipping, aiming to increase their modal share from 6 per cent to 12 per cent by 2047.

Seaplane and Infrastructure Financing

The Seaplane VGF Scheme will support indigenised seaplane manufacturing and operations.
An Infrastructure Risk Guarantee Fund will provide partial credit guarantees to lenders during the construction phase of infrastructure projects.

City Economic Regions and Carbon Capture

The Government proposed City Economic Regions (CERs) to map cities based on specific growth drivers, with ₹5,000 crore per CER over five years under a challenge-based model.
A Carbon Capture, Utilisation, and Storage (CCUS) scheme has been launched to decarbonise hard-to-abate sectors such as steel and cement.

Second Kartavya: Fulfil Aspirations and Build Capacity

AVGC Content Creator Labs

To promote the Orange Economy, the Government will support the Indian Institute of Creative Technologies, Mumbai, in setting up AVGC Content Creator Labs in 15,000 secondary schools and 500 colleges.

National Institute of Hospitality

A proposal has been made to establish a National Institute of Hospitality by upgrading the National Council for Hotel Management and Catering Technology, bridging the gap between academia and the tourism industry.

Khelo India Mission

The Khelo India Mission has been launched to strengthen the sports ecosystem through talent development, coach training, sports science integration, competitive leagues, and expanded infrastructure.

Medical Value Tourism

Five Regional Medical Hubs will be established in partnership with the private sector to promote India as a global wellness and medical tourism destination, integrating AYUSH centres, diagnostics, post-care, and rehabilitation facilities.

Women in STEM

To encourage female participation in STEM education, one girls’ hostel will be established in every district through Viability Gap Funding or capital support.

Third Kartavya: Sabka Saath, Sabka Vikas

Bharat-VISTAAR for Agriculture

The Bharat-VISTAAR (Virtually Integrated System to Access Agricultural Resources) platform will be launched as a multilingual AI-based tool integrating AgriStack and ICAR data to provide customised advisory services to farmers.

SHE Marts

Community-owned retail outlets called SHE Marts (Self-Help Entrepreneur Marts) will be established within cluster federations, building on the success of the Lakhpati Didi initiative.

Mental Health Infrastructure

The Government reaffirmed its commitment to mental healthcare by announcing NIMHANS-2 and proposing the upgradation of institutes in Ranchi and Tezpur as Regional Apex Institutions.

Purvodaya and North-East Development

A dedicated scheme will develop Buddhist Circuits across North-Eastern states.
The Budget also proposed an East Coast Industrial Corridor with a major node at Durgapur (West Bengal) and the creation of five tourism destinations in five Purvodaya states.

Support for Divyangjan

Targeted measures will be undertaken to empower persons with disabilities through focused welfare interventions, reinforcing inclusive growth.

Tax Reforms under Union Budget 2026–27

The Union Budget 2026–27 introduces a series of tax reforms aimed at simplification, stability, and investment promotion, while maintaining fiscal discipline. The reforms span direct taxes, indirect taxes, customs, tax administration, and sector-specific incentives.

Direct Tax Reforms

Introduction of the New Income Tax Act, 2025

The government has replaced the Income Tax Act, 1961 with a New Income Tax Act, 2025, which will come into effect from 1st April 2026. The new law aims to simplify language, reduce litigation, and improve taxpayer certainty.

Stability in Income Tax Rates

There are no changes in income tax slabs for FY 2026–27, ensuring continuity and predictability for taxpayers and businesses.

Rationalisation of TCS under Liberalised Remittance Scheme (LRS)

Tax Collected at Source (TCS) on:

• Overseas tour packages, and

• Remittances for education and medical purposes

has been reduced to a uniform rate of 2 per cent, without any threshold limit. This measure lowers the upfront tax burden and simplifies compliance.

Rationalisation and Decriminalisation of TDS Provisions

To remove ambiguity:

• TDS on supply of manpower services has been fixed at 1 per cent for Individuals/HUFs and 2 per cent for other entities.

• Non-production of books of accounts and failure to deduct TDS where payment is made in kind have been decriminalised, reducing fear of prosecution and promoting trust-based compliance.

Minimum Alternate Tax (MAT) Relief

The Budget proposes to exempt all non-residents paying tax on a presumptive basis from MAT, improving India’s attractiveness as an investment destination.

Immunity from Prosecution for Minor Foreign Asset Non-disclosure

Non-disclosure of foreign assets valued below ₹20 lakh will be granted immunity from prosecution, with retrospective effect from 1st October 2024, offering relief to small and inadvertent defaulters.

Shift in Buyback Tax Regime

The tax burden on share buybacks has been shifted:

• From the company

• To the shareholder,
  by taxing buybacks as capital gains in the hands of the recipient.

Securities and Market-Related Tax Measures

Securities Transaction Tax (STT)

STT has been marginally increased from 0.1 per cent to 0.15 per cent in certain segments, with the objective of curbing excessive speculation in equity markets.

Customs Duty and Indirect Tax Reforms

Customs Duty Rationalisation

• Customs duty on goods imported for personal use has been reduced from 20 per cent to 10 per cent.

• Full customs duty exemption has been granted on:

  • 17 cancer drugs, and

  • Medicines and foods used for the treatment of seven rare diseases, improving affordability and access.

Tax Administration and Ease of Compliance

Harmonisation of Accounting and Tax Standards

The Budget proposes the formation of a Joint Committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes (CBDT) to:

• Incorporate Income Computation and Disclosure Standards (ICDS) into Indian Accounting Standards (IndAS),

• Eliminate separate ICDS-based accounting from tax year 2027–28, and

• Rationalise the definition of “accountant” under Safe Harbour Rules, reducing compliance burden.

Strategic Tax Incentives for Investment and Industry

Data Centres and Cloud Services

Foreign companies providing global cloud services through Indian data centres will receive a tax holiday up to 2047, encouraging India’s emergence as a global data hub.

IFSC (GIFT City) Incentives

The tax holiday for Offshore Banking Units in IFSC (GIFT City) has been extended from 10 years to 20 years, strengthening India’s offshore financial ecosystem.

Critical Minerals and Green Manufacturing

Customs duty exemptions have been provided on capital goods required for:

• Processing critical minerals such as lithium and cobalt, and

• Manufacturing lithium-ion cells, supporting energy transition and strategic autonomy.

IT Sector Safe Harbour Expansion

The threshold for availing Safe Harbour Rules for IT services has been increased to ₹2,000 crore, with a unified category for software development and KPO services, enhancing certainty for the IT sector.

Customs Modernisation and Export Promotion

Sector-Specific Relief

Duty-free import limits for inputs in the marine, leather, and textile sectors have been enhanced to improve export competitiveness.

Aviation and Defence Manufacturing

Customs duty exemptions have been granted for parts and components used in:

• Aircraft manufacturing, and

• Maintenance, Repair and Overhaul (MRO) activities.

Trade Facilitation and Ease of Doing Business

The Budget proposes:

• A single digital window for cargo clearance,

• Instant customs clearance for compliant goods,

• Rollout of the Customs Integrated System (CIS), and

• Expanded AI-based container scanning.

It also makes fish catch in the Exclusive Economic Zone (EEZ) and High Seas duty-free, revises duty-free baggage allowances, and enables dispute settlement with reduced penalties for honest taxpayers.

Macroeconomic Fundamentals Highlighted in the Union Budget 2026–27

Fiscal Deficit

The fiscal deficit for BE 2026–27 is targeted at 4.3 per cent of GDP, improving from 4.4 per cent in RE 2025–26, and staying on the consolidation glide path.

Debt-to-GDP Ratio

The debt-to-GDP ratio is projected to decline to 55.6 per cent in BE 2026–27, with a medium-term target of 50 per cent by 2030–31, creating fiscal space for development spending.

Capital Expenditure Push

Capital expenditure has been increased to ₹12.2 lakh crore (around 3.1 per cent of GDP) for FY 2026–27.
Including grants-in-aid for capital assets, effective capital expenditure stands at ₹17.1 lakh crore (about 4.4 per cent of GDP), reinforcing infrastructure-led growth.

Growth Assumptions

The Budget assumes:

• Nominal GDP growth of 10.5 per cent, and

• Real GDP growth of around 7 per cent for FY 2026–27.

Budgetary Numbers

• RE 2025–26:

  • Non-debt receipts: ₹34 lakh crore

  • Total expenditure: ₹49.6 lakh crore

  • Capital expenditure: ₹11 lakh crore

• BE 2026–27:

  • Non-debt receipts: ₹36.5 lakh crore

  • Net tax receipts: ₹28.7 lakh crore

  • Total expenditure: ₹53.5 lakh crore

To finance the fiscal deficit, net market borrowings are estimated at ₹11.7 lakh crore, with gross borrowings of ₹17.2 lakh crore, supplemented by small savings and other sources.

Concerns Regarding the Union Budget 2026–27

Global Economic Headwinds

The Union Budget 2026–27 assumes a nominal GDP growth of about 10 per cent based on the First Advance Estimates of FY 2025–26. However, this assumption may be challenged by a global economic slowdown, ongoing geopolitical conflicts, and disruptions in international trade and supply chains.

Weak Revenue Buoyancy

Shortfalls in income tax and GST collections have reduced fiscal space for the government. As a result, expenditure compression has been observed, including potential cuts in capital expenditure and key social sector spending, which could weaken growth momentum.

Excessive Dependence on Supply-Side Growth

The Budget relies heavily on supply-side measures such as infrastructure creation to drive economic growth. However, private consumption, which accounts for nearly 60 per cent of GDP, remains subdued, particularly in rural areas, limiting the overall multiplier effect of public investment.

Implementation and Institutional Capacity Constraints

High-technology schemes such as Bharat-VISTAAR and Biopharma SHAKTI require advanced institutional capacity and effective coordination. These initiatives often face bureaucratic delays, execution bottlenecks, and land acquisition challenges, which may slow their impact.

Job Creation Challenges

The capital expenditure–led growth strategy focuses on capital-intensive sectors such as semiconductors and biopharma. These sectors have limited labour absorption capacity, raising concerns about jobless growth and a widening mismatch between education and employment skills.

Green Transition and Resource Constraints

The transition towards green technologies has increased demand for water, energy, and critical minerals. This may heighten import dependence and trigger greenflation, increasing input costs for MSMEs and domestic manufacturing.

Uncertainty in Capital Flows

Persistent foreign portfolio investment outflows and uncertainty regarding foreign direct investment inflows pose risks to external financing stability and long-term investor confidence.

External Aid Prioritisation Concerns

While the Budget allocates grants-in-aid to foreign countries, with Bhutan as the largest beneficiary, the absence of funding for the strategically significant Chabahar Port project raises concerns regarding India’s regional connectivity and strategic outreach.

Measures to Strengthen India’s Economy Beyond Budget 2026–27

Reviving the Twin Engines of Growth

India’s economic growth requires both investment and consumption to grow simultaneously. Faster implementation of schemes such as SHE Marts and Bharat-VISTAAR can raise rural incomes and stimulate consumption due to a higher marginal propensity to consume.

Ensuring Strategic Autonomy in Critical Resources

As critical minerals become vital for the green economy, India must strengthen domestic initiatives such as Rare Earth Corridors while also securing overseas mineral partnerships. At the same time, higher investment in research and development is necessary to support semiconductor and biopharma ecosystems.

Strengthening Skills for Emerging Sectors

The expansion of sectors such as AVGC and semiconductors must be supported by large-scale skill development initiatives, including Skill India 2.0, to prevent talent shortages and enhance employment generation.

Improving the Quality of Public Expenditure

There is a need to shift the focus from expenditure outlays to measurable outcomes. Public spending under schemes such as Mahatma Gandhi Gram Swaraj should be evaluated based on asset creation and sustainable income generation.

Correcting Inverted Duty Structures

Inverted duty structures in sectors such as textiles and electronics increase the cost of domestic manufacturing. A sector-specific rationalisation of customs duties is required to ensure that domestically manufactured goods remain competitive.

Conclusion

The Union Budget 2026–27 combines fiscal prudence with a strong emphasis on high-technology manufacturing and inclusive development. However, its success will depend on effective implementation, meaningful job creation, and revival of private consumption to ensure that economic growth reaches the last mile.

 

Recently, the states of Kerala and Tamil Nadu have initiated efforts to restore habitats and strengthen monitoring mechanisms for the conservation of the grey slender loris, a rare and threatened primate species found in southern India.

About Grey Slender Loris

The grey slender loris (Loris lydekkerianus) is a species of primate belonging to the family Loridae. It is classified as a prosimian, which means it belongs to one of the oldest and most primitive groups of primates.

Habitat

The grey slender loris inhabits a wide range of forest ecosystems, including:

• Tropical primary and secondary rainforests,

• Dry semi-deciduous forests,

• Scrub forests,

• Swamps,

• Acacia and bamboo forests,

• Forest edges, and

• Montane cloud forests.

Geographical Distribution

The species is mainly found in southern India, particularly in the states of Karnataka, Kerala, and Tamil Nadu, and also occurs in Sri Lanka.

Physical and Behavioural Characteristics

The grey slender loris is a nocturnal hunter, active primarily during the night. It has no tail, and its flexible spine and long limbs enable it to move swiftly and silently across the forest canopy.

The species possesses opposable thumbs, which allow it to cling motionless to branches for extended periods. It has large, forward-facing eyes that provide exceptional night vision, aiding in nocturnal foraging.

Communication

Grey slender lorises communicate through a combination of vocalisations and scent marking, which play an important role in territorial behaviour and social interaction.

Diet

The grey slender loris is almost entirely insectivorous. More than half of its diet consists of ants and termites, making it an important species for natural pest control within forest ecosystems.

Threats

The species faces several threats, including:

• Illegal pet trade,

• Hunting for body parts, and

• Roadside captures, often resulting from habitat fragmentation and increased human–wildlife interaction.

Conservation Status

• IUCN Red List: Near Threatened

• CITES: Appendix II

• Wildlife (Protection) Act, 1972: Schedule I

These listings provide the species with varying levels of international and national legal protection.

Significance of Conservation Efforts

Protecting the grey slender loris is crucial for maintaining forest biodiversity and ecological balance, as the species plays a key role in controlling insect populations and indicates forest health.