Budget 2026 puts focus on manufacturing to boost economic growth
What's the story
India's Finance Minister Nirmala Sitharaman has unveiled the Union Budget for 2026, focusing on the manufacturing sector to drive economic growth. The budget aims to accelerate and sustain India's strong economic growth amid a volatile global environment. Sitharaman highlighted that the government's priorities include structural reforms, a robust financial sector, and investments in advanced technologies like artificial intelligence (AI).
Economic targets
Manufacturing to create jobs for millions
The Modi government aims to increase manufacturing from the current level of under 20% of GDP to 25%. This is part of a larger plan to create jobs for millions joining the workforce every year. The Indian economy is projected to grow at 7.4% in the current fiscal year, with inflation expected near 2%. The government's fiscal deficit for this year is estimated at 4.4% of GDP.
Sectoral focus
Budget boosts manufacturing in 7 key sectors
The budget has earmarked funds for boosting manufacturing in seven key sectors: pharmaceuticals, semiconductors, rare earth magnets, chemicals, capital goods, textiles, and sports goods. The government also plans to revive 200 legacy industrial clusters as part of this initiative. Sitharaman said these measures are aimed at strengthening India's growth momentum while building resilience and expanding opportunities across sectors and regions.
Strategic shift
Modi calls for long-term solutions in economic strategy
Prime Minister Narendra Modi stressed the importance of long-term solutions in India's economic strategy. He said, "The nation is moving away from long-term problems to tread the path of long-term solutions." This comes as the government's economic survey forecast growth between 6.8% and 7.2% for FY2026-27. Modi also highlighted that India will continue with "next-generation reforms" to achieve its goal of becoming a developed economy in the next 25 years.
Trade agreements
India to sign trade deals to counter US tariffs impact
India is also signing trade deals like the historic pact with the European Union, to counter the impact of the US President Donald Trump's 50% tariffs on select Indian goods exported to the US. To keep economic growth strong, the government will also spend ₹12.2 trillion ($133.08 billion) on infrastructure in FY2026-27, compared to ₹11.2 trillion last fiscal year.