Union Budget: Higher Capex, Fiscal Discipline, No Income Tax Relief; Focus on Defence, Health

Mangalore Today News Network

New Delhi, Feb 1, 2026: Presenting the Union Budget in a 124-minute speech, Finance Minister Nirmala Sitharaman on Saturday announced an increased capital expenditure (capex) outlay of ₹12.2 lakh crore for FY 2026–27 and pegged the fiscal deficit target at 4.3 per cent of GDP. The stock markets reacted sharply, with the Sensex plunging over 1,600 points before recovering partially.

The Budget offered no relief to individual income tax payers, who will transition to the new Income Tax Act from April 1, with no changes announced in tax slabs, rebates or the standard deduction. However, Sitharaman proposed a tax holiday until 2047 for foreign companies providing cloud services by setting up data centres in India, along with a simplified corporate tax regime and rationalisation of the prosecution framework under the new Act.

A key social-sector measure included targeted relief for cancer patients, with the Finance Minister announcing exemption of basic customs duty on 17 essential cancer drugs and medicines to lower treatment costs. In addition, seven more rare diseases will be covered under duty exemption for personal imports of drugs, medicines and specialised nutrition used in cancer care.

Among other major announcements was the setting up of a committee to study the impact of emerging technologies such as Artificial Intelligence on the services sector. The government also proposed a ₹40,000 crore push over five years for the semiconductor sector, focusing on research and training centres.

Defence received a significant boost, with ₹2.19 lakh crore allocated for military modernisation in FY 2026–27, marking an increase of 21.84 per cent. The overall defence budget was raised to ₹7.85 lakh crore, accounting for about 11 per cent of GDP, up from eight per cent in FY26.

To drive accelerated and sustainable growth, Sitharaman outlined interventions in six strategic areas, including scaling up manufacturing in key sectors, creation of ‘champion MSMEs’, and development of India as a global bio-pharma hub under the Biopharma Shakti Mission, with an outlay of ₹10,000 crore over five years.

The Budget also proposed the establishment of mega textile parks and a National Fibre Scheme to achieve self-sufficiency in textiles. A Mahatma Gandhi Gram Samaj initiative was announced to support Khadi and handicrafts, alongside an upskilling programme aimed at boosting employment in the sector.

Institutional reforms featured prominently, with proposals to set up a high-level committee to comprehensively review the banking sector, undertake a review of the Foreign Exchange Management framework, and permit foreign individuals to invest in Indian equities.

On infrastructure, the Finance Minister said seven high-speed rail corridors — including Mumbai–Pune, Hyderabad–Pune, Hyderabad–Bengaluru, Chennai–Bengaluru, Delhi–Varanasi and Varanasi–Siliguri — would be developed as ‘growth connectors’.

To reduce dependence on China for rare earth minerals, dedicated corridors will be established in Tamil Nadu, Kerala, Odisha and Andhra Pradesh.

The Budget also focused on healthcare-led employment generation, with plans to create hubs for medical tourism. The Centre will support states in setting up five regional medical hubs with AYUSH centres, advanced diagnostics and post-care rehabilitation facilities, aimed at job creation and strengthening India’s healthcare ecosystem.