Finance Minister Nirmala Sitharaman presented her ninth consecutive budget on February 1, 2026. There's no doubt that despite global challenges and uncertain global markets due to US President Trump's tariffs; and the attempts by major economic powers to weaponize global value chains, including the supply of essential minerals, semiconductors, and many other commodities; and the misuse of the payment system, the Indian economy is in fairly good shape, becoming the world's fastest-growing major economy for the fourth consecutive year. The falling rupee, persistent trade and payments deficits, and uncertainty about the potential for private investment to rise alongside rising public investment presented several concerns for the Finance Minister. The Economic Survey presents a realistic picture of the economy, highlighting concerns, particularly the falling rupee, the continued decline in FDI, leading to negative net FDI, and the need for appropriate measures. The Survey also raised several other issues, not only for economy, but also for the society, including the dangers posed by the digital addiction of youth. Obviously, all of them could not be addressed in this budget, but it seems that the broad policy direction in the budget is clear, that India will not only try to protect itself from global turmoil, but will also take the economy forward, strengthening the manufacturing, not just for resilience, but will also to become an important player in the global economy.
The budget proposes to increase manufacturing in seven strategic sectors. For a long time, India has been dependent on foreign countries, especially China, for supplies of semiconductors, rare earth materials, electronics, chemicals, and capital goods. All of these have been addressed in the budget, and strategy has been formulated to increase production in these sectors. This will not only help reduce our dependence on China but also protect the economy from being exploited by big powers, who are trying to weaponize the global value chain, as described in the Economic Survey itself. Not only India, but the entire world has been facing China's tantrums regarding the supply of rare earth materials. It's not that India lacks rare earth materials, but what we lack is capacity in mining, processing, and manufacturing in these important minerals. The budget has provided assistance to mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to establish dedicated rare earth corridors and promote their mining, processing, research, and manufacturing.
The plan to enhance the production of construction and infrastructure equipment (CIE) introduced in the budget will strengthen domestic manufacturing of high-value, technologically advanced CIE. Given the country's acute shortage of containers and its heavy dependence on China, the announcement to create a globally competitive container manufacturing ecosystem, with a budgetary allocation of ₹710,000 crore (710 billion rupees), is a significant step forward.
Another major boost to manufacturing has been in bio-pharmaceuticals. It's worth noting that biopharmaceuticals, including biosimilars, can revolutionize the treatment of many non-communicable diseases (NCDs).
A comprehensive plan for the labor-intensive textile sector is a major step in the budget. Furthermore, the launch of the 'Mahatma Gandhi Gram Swaraj' initiative will strengthen khadi and handloom. Apart from this, an allocation of Rs 10,000 to support micro, small and medium enterprises (MSMEs) is an important step.
The budget proposes to increase capital expenditure (Capex) to ₹12.2 lakh crore, with effective Capex at 4.4 percent of GDP, not only the highest ever, but also exceeding the fiscal deficit. This has never happened before, and we can conclude that the government is borrowing, not for consumption, but to actually build infrastructure and other capital assets.
New dedicated freight corridors and 20 new national waterways could provide a significant boost to our infrastructure.
Another important part of the proposals is the creation of professionals for a developed India. In the health sector, 100,000 allied health professionals (AHPs), 1.5 lakh caregivers, and 20,000 veterinary professionals to be trained over the next five years, are some initiatives, crucial to address the skills gaps.
Aiming to boost farmers' incomes, the budget includes integrated development of 500 reservoirs and Amrit Sarovars to boost the fisheries sector, strengthening the fisheries value chain in coastal areas, linking startups and women's groups with Fish Farmers Producer Organizations (FPOs), implementing a credit-linked subsidy program, and supporting the animal husbandry sector through entrepreneurship development programs such as Livestock Farmer Producer Organizations. There are also plans to modernize livestock enterprises and develop integrated value chains for dairy and poultry.
Additionally, high-value agriculture will be promoted in coastal areas with crops such as coconut, sandalwood, cocoa, and cashews. Nuts such as almonds, walnuts, and pine nuts in hilly areas can also play an important role in increasing rural incomes.
The figures are certainly impressive.
We note that a growth rate of 7.4 percent, inflation below 2 percent, and a consistently declining fiscal deficit, indicate that the economy is in a relatively stronger position. However, challenges such as the falling rupee, global turmoil, tariffs, and the weaponization of value chains remain, which are tried to be addressed in Union Budget 2026-27. Budget proposes to further reduce the fiscal deficit to 4.3 percent of GDP, from 4.4 percent in 2025-26 (Revised Estimates). This gives yet another reason for inflation to remain under control.
Overall, this budget appears to encourage manufacturing, infrastructure, and employment growth. It also seeks to control inflation while empowering villages and farmers, and boost incomes.
Dr. Ashwani Mahajan
(The content of this article reflects the views of writer and contributor, not necessarily those of the publisher and editor. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Delhi/New Delhi only)
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