Union Budget 2026 is pragmatic

The budget for the financial year 2026-27 comes across as a pragmatic effort aimed at sustaining the 7% year on year growth of the Indian Economy. In this era of global trade consultancy and political turmoil, India is one of very few countries with consistent growth and the budget aims at sustaining the same.

Any infrastructure development contributes around 2 to 3 times of the spending to GDP Growth. The government’s 12.2 lakh crore infrastructure outlay will certainly help sustain the 7% growth especially when the private capex investment is muted.

India’s manufacturing sector currently contributes around 18% of GDP. The government aims to increase it to 25% in medium term as manufacturing provides jobs. The 40,000 crore electronics PLI Scheme, 10,000 crore MSME Growth fund and 10,000 crore biopharma outlay are few steps to strengthen the manufacturing sector. The “Education to Employment” approach of the education outlay of 1.39 lakh crore should also hopefully contribute to more skilled workforce.

AI Is the new growth engine of the world and data centers are at the heart of this growth. The tax-holiday to data centers set up in India till 2047 will certainly make India a attractive destination for setting up global data centers. It is now up to the States to capitalize on this opportunity and attract global data center investment.

I say the budget is pragmatic because fiscal prudence lies at the heart of this budget. The initiatives listed above are not populist and focused on developing the ecosystem of growth. The government focus on reining in the fiscal deficit to 4.3% of GDP and Debt to GDP ratio to 55% is a result of it not going populist in this budget.

While all this is fine, I believe the government has missed a good opportunity to address two issues.

There is no initiative to address the pain of 50% tariff thrust by US on Indian exports. The 50% tariff is a result of Russian engagement. While there is no advocacy for reducing the engagement with an all-weather friend like Russia, the government should have used this opportunity to reduce the pain of the exporters to US by providing subsidies to retain competitiveness of our exports.

The second area that remains unaddressed is the GIG Workers. The GIG Economy has been growing at a rate of more than 10% per year and more and more people are getting employed in such platform companies. The new labour codes unveiled in 2025 aim to provide social security to the GIG Workers but with majority of GIG Workers earning less than 15000/- a month, Social Security will remain on paper without government’s financial support. The budget has failed the GIG Workers on this front, especially on providing employment allowance and provisioning for other social security leisure.

The budget is a pragmatic budget focusing on infrastructure growth which is important for Indian economy to continuously grow at the expected 7% year on year. The infrastructure push via the 12.2 lakh crore infrastructure Capex planned by the government will continue to sustain the growth. The budget is also rightly focuses on the important growth area for India i.e. electronics and semiconductors sector via the 40000 crore PLI scheme.

The decision to provide tax holiday to Data Centers being set up in India and servicing globally till 2047 is a step in the right direction as AI and data centers are the new engines of growth.

The 10000 crore fund to support MSMEs is also important as MSMEs are the largest job providers in the country.

Aditya Jadhav

(The author is Principal Officer (Student Acquisition and Marketing), Manipal Academy of Higher Education (MAHE); Professor of Finance, TAPMI)

(The views expressed above are the author's own. They do not necessarily reflect the views of DH).