NEW DELHI — India on Sunday unveiled its 2026-27 federal budget with a bigger push on infrastructure and targeted manufacturing incentives, while promising modest fiscal consolidation despite revenue strain from earlier tax cuts and fresh external headwinds from U.S. tariffs and volatile markets.
Finance Minister Nirmala Sitharaman presented the plan in Parliament of India, proposing total expenditure of about 53.5 trillion rupees (roughly $583 billion) for the fiscal year beginning April 1, according to budget documents and media reports.
At the centre of the package is a record 12.2 trillion rupees ($133 billion) capital spending target for infrastructure—an 11.4% rise—after the government revised down the current year’s capex estimate to 10.95 trillion rupees from 11.21 trillion. The budget also raises long-term, interest-free loans to states for capital projects by 23% to 1.85 trillion rupees, with roads and railways expected to take the largest share.
The spending drive is paired with a renewed manufacturing push, reflecting Prime Minister Narendra Modi’s long-running goal of lifting manufacturing’s share of GDP from under 20% toward 25% to create jobs. Officials said incentives will focus on seven “strategic” sectors—such as pharmaceuticals, semiconductors, rare-earth magnets, chemicals, capital goods, textiles and sports goods—alongside niche areas including artificial intelligence and electronics components.
Even with higher capex, New Delhi set a fiscal deficit target of 4.3% of GDP for 2026-27 (from 4.4% this year) and a debt-to-GDP objective of 55.6% (from 56.1%), while planning record gross borrowing of 17.2 trillion rupees—a figure bond traders said could keep yields elevated. Moody’s Ratings called the budget “tactical,” arguing the consolidation path is steady but not transformative for India’s credit profile.
The budget arrives as the government’s Economic Survey forecasts 6.8%–7.2% GDP growth next year, slightly below the 7.4% expected this year. It also lands amid a weaker currency—Reuters reported the rupee hit record lows near 92 per dollar in late January—after sustained foreign outflows and as Donald Trump maintains punitive tariffs that have been linked to India’s purchases of Russian oil.
