On Sunday, February 1, 2026, Union Finance Minister Nirmala Sitharaman presented her ninth consecutive Budget, navigating a complex economic landscape. As the Economic Survey 2025–26 noted, the previous year was marked by a divergence between expectations and reality, with the Global Uncertainty Policy Index hitting 389.43 in October 2025. Despite this volatility, India’s robust macro fundamentals have provided a crucial buffer. The Budget translates the Survey’s strategy of building resilience to absorb external shocks into action, offering clear fiscal direction and new initiatives to drive domestic growth and the ‘Viksit Bharat’ agenda. The Economic Survey projects real GDP growth of 6.8% to 7.2% for FY27. The promise made by the FM in 2021 to reduce the Union fiscal deficit by more than half from 9.2% in FY21 has now been achieved. As the Economic Survey 2025–26 points out, India obtained its first credit rating upgrade from a major agency in nearly two decades, since S&P upgraded India from “BBB- “to “BBB”.
Let’s look at the fiscal numbers. On the path towards achieving a debt-to-GDP ratio of 50±1 per cent by 2030–31, the RE 2025–26 estimates the debt-to-GDP ratio at 56.1, whereas the BE 2026–27 aims to achieve 55.6. The fiscal deficit estimate of 4.4 per cent of GDP in RE 2025–26 fulfils the FM’s commitment of FY2021–22 in reducing the fiscal deficit to below 4.5 per cent. The BE 2026–27 fiscal deficit is 4.3 per cent, aligning well with the sustained goal of fiscal prudence.
The public capex push continues, with an estimate of Rs 12.2 lakh crore in FY 2026–27, about a 430% increase from the BE 2013–14 of Rs 2.29 lakh crore. The multiplier effect of this continued capex will drive growth, job creation and long-term development.
The Budget supports growth by scaling up manufacturing in seven frontier sectors, rejuvenating legacy industrial sectors, creating “Champion MSMEs” with a continued push towards infrastructure, and ensuring long-term energy security and stability. The “Developing City Economic Regions” intervention stands out in this Budget.
The specific proposals, such as Biopharma SHAKTI, Indian Semiconductor Mission 2.0, electronics component manufacturing scheme, dedicated rare earth corridors in mineral-rich states, dedicated chemical parks, and container manufacturing, aim at industry-led research, technology development, and building a skilled workforce towards an Atmanirbhar Bharat.
The All India Survey on Higher Education 2020–21 reports the highest enrolment in undergraduate programmes in Arts, followed by Science and Commerce. The highest enrolment is found in the state public universities. The PLFS 2023–24 annual report indicates that the unemployment rate for individuals aged 15 and above with secondary education or higher is 6.5%. Though it has declined from 8% in 2020–21, employability remains a concern. In this context, the proposal for a High-Level Education-to-Employment and Enterprise Standing Committee is timely, as it addresses the skill gap, employability, and job-readiness debate in the public domain. The proposal to establish five University Townships in the vicinity of major industrial and logistics corridors is a welcome move. These planned academic zones, hosting multiple universities, colleges, research institutions, skill centres, and residential complexes, will enhance industry-academia collaboration and the employability of our graduates.
Among other initiatives, the proposal for one girls’ hostel in every district for STEM students, and targeted schemes to increase marginal farmers’ incomes make the Budget regionally and socially inclusive.
Based on the 16th Finance Commission recommendations, Rs 1.4 lakh crore is provided to the states for FY 2026–27 as Finance Commission Grants, including grants to the Rural and Urban Local Bodies and Disaster Management Grants. Telangana will benefit from this grant. Though there are no post-devolution revenue deficit grants this time, Telangana will benefit from the urban local bodies grant under the basic, special infrastructure, and urbanisation premium components. The usual transfers under centrally sponsored schemes, central sector schemes, and capital transfers remain.
Overall, the Budget promises to deliver capex-led, sustained growth with fiscal prudence, an inclusive approach towards cities, and the IKS through the establishment of three All India Institutes of Ayurveda.
Debashis Acharya
(The author is Professor and Dean, School of Economics, University of Hyderabad)