Union Budget 2026-27 Expectations: Pre-Budget Analysis
Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget 2026-27 tomorrow, February 1st. The government is faced with the challenge of managing fiscal (budgetary) consolidation and the need to sustain capex, stimulate consumption, and enhance India’s competitiveness.
Below is a structured and sector-wise budget trends outlook on the top 25 expectations that shape the pre-budget discourse.
What are sector-wise predictions for Budget 2026?
Here are the top 25 pre-budget sector-wise analyses for tomorrow's budget announcements:
Infrastructure
The government is expected to continue its aggressive capital expenditure policy, with analysts projecting an increase of 10-15% in the Capex outlay to approximately ₹12.2-12.5 lakh crore. A key highlight is likely to be the announcement of National Infrastructure Pipeline (NIP) 2.0, which runs from 2026 to 2032 and will shift the focus from quantity to quality and resilience in the construction of roads and highways. This sustained push is meant to attract private investment and improve logistics efficiency across the country.
Renewables
To give a boost to the transition towards 500 GW of non-fossil capacity by 2030, the budget is expected to reveal a dedicated policy for Battery Energy Storage Systems (BESS). This includes potential Viability Gap Funding (VGF) to provide round-the-clock (RTC) green energy. Furthermore, industry stakeholders are anticipating customs duty exemptions for critical components for solar modules and wind turbines to reduce project costs and make new projects viable in the face of global supply chain variations.
Defence
With a focus on self-reliance, the capital outlay of the defence sector will likely see a 10-12% increase. Another expectation is the allocation of a special fund for defence startups (iDEX) to fast-track indigenisation in key sectors such as drone warfare, AI and cyber security, ensuring that most of the capital expenditure flows to domestic industries.
Real Estate
The real estate sector is banking on the reintroduction of the Home Loan Interest Deduction under the New Tax Regime. This move is necessary to turn around demand in the mid-segment housing market, which has seen tepid growth in recent years. Additionally, developers are renewing their long-standing demand for infrastructure status, which would significantly reduce their cost of credit and help to streamline project financing. The real estate industry is also expecting a reduction in stamp duty charges.
EVs (Electric Vehicles)
With the current subsidy regime set to expire in March 2026, the budget is likely to see an extension of the PM E-DRIVE scheme (earlier FAME) with an additional outlay. This is also expected to see an enhancement of EV R&D in batteries and rare earth magnets, making Make in India more competitive.
Agriculture
To help sustain rural incomes and protect farmers against climate risks, hopes are high that the annual benefit under PM-Kisan Samman Nidhi will be increased. The budget allocation for the agriculture sector is expected to increase to ₹1.5 lakh crore. Some new bills benefiting agriculture, like the New Seeds Bill, are also anticipated to be released. Beyond cash transfers, the government is likely to launch warehousing facilities to build cold storage and logistics infrastructure for perishable crops, aiming to reduce post-harvest losses and stabilise prices.
Railways
It is expected that the budget will give 10% increased allocation to the railway sector, from Rs 2.52 trillion last year to Rs 2.75 trillion in this budget, to boost capacity, gauge conversion, new construction and lines. Additionally, it is anticipated to improve the Kavach. On the passenger front, the Finance Minister is likely to announce some new Vande Bharat Sleeper trains to replace ageing fleets, signalling a modernisation of long-distance travel, while keeping a strong focus on safety upgrades.
NBFCs
The NBFC sector is eagerly awaiting support for the growth priorities and big-ticket projects. The NBFC sector is anticipating that the Government will focus on the implementation aspect, coordination, and reducing friction in the approval process. The NBFC sector is looking forward to enabling activities such as improving efficiency to facilitate funding, improving accessibility to refinancing, and ensuring a level playing field for the use of SARFAESI.
Micro, Small, and Medium Enterprises
(MSMEs)
To stimulate labour-intensive manufacturing, the budget is expected to expand the PLI Scheme to include new sectors that are dominated by MSMEs. Crucially, small businesses are looking forward to an increase in the collateral-free loan limit, which would help in providing liquidity for expansion and modernisation without having to burden assets.
Exports
With global trade under headwinds, such as recent threats from major trading partners like the US, exporters are looking at incentives to ensure they avoid high tariff barriers. The budget is anticipated to include collateral guarantees to cover up to 85% for loans to small exporters, interest subvention on rupee export credit, as well as support funding for BharatTradeNet to reduce compliance and logistics costs.
Semiconductors
Building on the success of the initial rollout, more allocation is anticipated from the India Semiconductor Mission (ISM) with special emphasis on assembly, testing, marking, and packaging (ATMP) units. The budget may also bring in new incentives, specifically designed for fabless design startups, to move India up the value chain from just assembly to actual chip design and innovation.
Gold
To curb smuggling and promote the export of the legitimate jewellery industry, the industry is widely expecting a cut in the Customs Duty on Gold. Simultaneously, the government is expected to announce a new tranche of Sovereign Gold Bonds (SGB) with an increased issuance limit, following its policy to divert savings held by households from physical gold to financial gold instruments. It is also expected to streamline and bring uniformity in gold taxation.
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Capital Markets
Investors are anticipating a rationalisation of the Capital Gains Tax structure. The expectation is for a uniform holding period for all equity assets to qualify as long-term, eliminating the confusion of different asset classes. There are also speculations about a potential rise in the exemption limit of LTCG from Rs 1.25 lakh to Rs 2 lakh, aimed at increasing the retail participation in the markets.
FMCG
The Fast-Moving consumer goods (FMCG) industry is looking forward to consistent policy support. The industry is expecting the budget announcements to further fuel the momentum in the FMCG industry, with a focus on enhancing supply chain and infrastructure, agricultural production, and technological investments to fuel demand. The industry is also expecting the extension of the 0% GST rate applied to wheat to the packaged Atta industry. Higher subsidies for agro-based food processing (staple segments) are also expected.
Healthcare
The budget is expected to cut customs duties on essential drugs, targeted therapy drugs, and sophisticated equipment such as robotics and radiotherapy machines. It is expected to support the infra-linked PLI sector and announce policies to encourage pharmaceutical manufacturing. It is also expected to include medical devices in PLI 2.0 and reduce import dependence through R&D tax incentives and GST rationalisation.
Logistics
The budget is expected to provide a push for infrastructure, under the PM Gati Shakti scheme, especially for dry ports, port connectivity, freight corridors, and faster development of Multi-Modal Logistics Parks. GST rationalisation is also anticipated in the warehousing and logistics industries, as well as improved digital compliance tools.
Education
The education industry eagerly awaits more focus on digital classroom infrastructure, teacher training, and GST rationalisation on basic education inputs. The budget is also expected to waive the 18% GST on textbook paper and lower taxes on digital learning infrastructure, devices, and content used in schools, making digital learning tools more accessible to students in Tier-2 and Tier-3 cities.
Insurance
To attract more global capital and expertise, the budget is expected to propose increasing the limit of FDI to 100% or relaxing some solvency norms of insurance companies. There is also an expectation that tax incentives on health insurance premiums (under Section 80D) may be migrated to the New Tax Regime, in an effort to increase health insurance penetration among the younger workforce.
Metals
The budget is expected to raise the basic customs duty on all Aluminium products to a uniform 15% from the current 2.5-10%. The other anticipation is a reduction in customs duty on raw pet coke, calcined pet coke, aluminium fluoride and caustic soda. In addition to this, a reduction or waiver of the 2.5% basic customs duty on coking coal is expected. Also, the mining sector is pushing the government to waive the export duty on low-grade iron ore to help the miners put the surplus inventory to effective use.
Solar energy
The solar energy industry looks forward to the expansion of the PLI scheme to the whole value chain and to grid infrastructure. The optimisation of PM Surya Ghar Muft Bijli Yojana and PM-KUSUM is also expected under the budget announcements, along with the launch of new tools for green finance, including climate-themed funds and sovereign green bonds.
Smart meters
There is an expectation of budgetary allocation for smart meters in India and recognition of AMI in the Harmonised Master List of Infrastructure. This will help in the unlocking of low-cost capital, infrastructure bonds, priority sector lending, global institutional investments and InVITs.
Electronics
Building on the electronics manufacturing boom, a PLI 2.0 for IT Hardware is anticipated in budget announcements, which will provide higher incentives specifically for laptops, servers, and tablets to reduce import dependence. The industry also hopes for a cut in import duties on major mobile phone components (such as camera modules and printed circuit boards) to increase domestic value addition beyond basic assembling.
Startups
The budget is expected to widen the definition of startups; the GoI is making it clear that the coming decade of growth will be fueled by IP and deep science. Investors and entrepreneurs are looking for more practical enabling measures to ensure faster access to capital and credit, GST simplification, tax treatment for early-stage investors, ESOPs, and more simplified compliance regimes under the budget announcements.
Restaurant industry
The restaurant industry in India is looking forward to more growth enablers and stable policymaking in the coming Budget. F&B rates, particularly for dine-out, are expected to be rationalised, and ITC (input tax credit) is expected to be restored to offset increased costs. The industry is also looking for a separate sector recognition for F&B, with a potentially separate Ministry to address its issues.
Power distribution
Addressing the financial stress of DISCOMs, the Centre may increase the allocation for the Revamped Distribution Sector Scheme (RDSS) to more than ₹18,000 crore in the budget. This funding is likely to be coupled with strict penalties and incentives for the installation of Smart Meters, to drastically reduce Aggregate Technical and Commercial (AT&C) losses across the power grid.
Also read what to expect from the Budget 2026-27, tax slabs, capital gains and growth sectors.
To wrap up
The Union Budget 2026 is set to be a forward-looking financial statement that balances economic prudence with ambitious growth targets. By strategically distributing resources and implementing specific policy measures in these diverse sectors, the government seeks to solidify India's status as a strong and resilient economy. Taxpayers and investors will be closely monitoring the budget announcements that could affect their financial planning and investment strategies.
