India’s budget aims to ramp up domestic manufacturing in a volatile environment

NEW DELHI: India’s Finance Minister Nirmala Sitharaman presented the 2026/2027 budget to parliament on Sunday aiming to lift manufacturing and generate jobs in the world’s most populous country.

Here are the highlights:

Finance Minister says India faces disruptive external environment, must stay deeply integrated with global markets
Says to sustain reform momentum, focus on strong finance sector and new technology Economic survey report ahead of budget projects 6.8%-7.2% growth for 2026/27

Debt to GDP, fiscal deficit

Federal government’s debt to GDP ratio target for 2026/27 set at 55.6%, down from estimated 56.1% of GDP in current fiscal year Fiscal deficit target for 2026/27 set at 4.3% of GDP against 4.4% for current fiscal year Gross federal government borrowing for 2026/27 seen at 17.2 trillion rupees ($187.63 billion)
Net federal government borrowing for 2026/27 seen at 11.7 trillion rupees

Increase in spending

Proposes to increase capital spending to 12.2 trillion rupees ($133.08 billion) in 2026/27 from revised 11.0 trillion rupees in 2025/26 To scale up manufacturing in seven sectors, push infrastructure

To develop India as global pharma manufacturing hub To allocate 100 billion rupees for bio-pharma over 5 years
Proposes to increase 400 billion rupees spending for semi-conductor manufacturing Proposes to develop seven high-speed rail corridors Proposes spending 200 billion rupees for carbon emission cutting programmes over 5 years
Proposes to set up 100 billion rupees growth fund to support small businesses
Economic reforms
To set up high level committee to suggest banking reforms Proposes allowing people outside India to invest in equity of listed companies
To increase investment limit for individual PROIs (Persons resident outside India) to 10% from 5%
Overall investment limit for all PROIs raised to 24% from 10% Proposes new framework with suitable access to funds and derivatives on corporate bond indices ($1 = 91.6710 Indian rupees)
Cut in import tariffs
Proposes to raise limit for duty free imports for processing seafood exports to 3% Extend Basic customs duty (BCD) exemption to capital goods used to manufacture lithium ion batteries Provide BCD exemption to capital goods for processing critical minerals in India

Funds for states