The Union Budget 2026 focuses on investment-driven growth, with an emphasis on expanding manufacturing, infrastructure development, and the MSME sector. The budget was presented on 1 February 2026 by Finance Minister Nirmala Sitharaman. Key allocations include Rs 12.2 lakh crore for public capital expenditure.

The Budget is guided by three key kartavyas:

Kartavya 1: Promote and sustain economic growth by increasing productivity and competitiveness, while making the economy resilient to global uncertainties.

Kartavya 2: Meet citizens’ aspirations and build their capacities through human capital development, skill enhancement, and employability.

Kartavya 3: Ensure inclusive and balanced development with universal access.

The fiscal deficit is targeted at 4.3% of GDP, with the debt-to-GDP ratio projected at 55.6%, supporting sustained capex while helping moderate interest costs.

Total expenditure is estimated at Rs 53.5 lakh crore, with non-debt receipts of Rs 36.5 lakh crore.

Sector Impact Matrix

The Union Budget 2026 measures target strategic sectors aligned with Atmanirbhar Bharat, infrastructure expansion, and services-led growth, aimed at crowding in private investment amid global uncertainties.

Sector	Key Announcements	Expected Impact
Infrastructure	Rs 12.2 lakh crore capex; 7 high-speed rail corridors; 20 new waterways; City Economic Regions (Rs 5,000 crore per region).	Improves logistics efficiency and urban growth in Tier II and III cities; crowds in private capex through a risk guarantee framework.
Manufacturing	ISM 2.0 (Rs 40,000 crore); Electronics scheme (Rs 40,000 crore); Container manufacturing scheme (Rs 10,000 crore); revival of 200 legacy clusters.	Strengthens domestic value chains in semiconductors, chemicals, and capital goods, improving global competitiveness.
MSMEs	Rs 10,000 crore SME Growth Fund; Rs 2,000 crore top-up to the Self-Reliant India Fund; TReDS mandate for CPSEs.	Improves equity and liquidity access, formalises supply chains, and supports the development of ‘Champion MSMEs’.
Biopharma	Biopharma SHAKTI (Rs 10,000 crore); three new NIPERs; 1,000 clinical trials.	Positions India as a biologics hub and strengthens R&D and regulatory capabilities.
Textiles	Integrated programmes covering fibre development, cluster modernisation, Tex-Eco initiatives, and Mega Parks.	Modernises textile clusters and boosts employment and exports in labour-intensive value chains.
Energy/Climate	CCUS allocation of Rs 20,000 crore for power, steel, and chemicals; green logistics initiatives.	Supports decarbonisation goals and enhances long-term energy security.
Digital/IT	Tax holiday for data centres extended till 2047; unified IT services safe harbour at 15.5%.	Attracts hyperscalers and simplifies compliance for export-oriented IT services.
Healthcare/Tourism	Five medical hubs; AYUSH expansion; development of 15 heritage sites; training of 10,000 tourist guides.	Strengthens medical value tourism and generates employment across allied health and care sectors.

These initiatives align with six growth priorities: manufacturing scale-up, legacy rejuvenation, MSME champions, infrastructure expansion, energy security, and urban development.

Earnings Sensitivity Analysis

Earnings sensitivity measures how responsive sector earnings are to budgetary levers such as capex multipliers, subsidies, and demand stimulus. High sensitivity indicates potential EPS upside of over 10-20%, medium sensitivity reflects 5-10%, and low sensitivity remains below 5%. Execution risks and global headwinds may moderate immediate gains, favouring companies with strong balance sheets.

Sector	Sensitivity	Key Drivers of Earnings Upside/Downside	Example Implications for Companies
Infrastructure	High	Capex execution of Rs 12.2 lakh crore and order inflows from rail and waterways.	EPC firms could see 15-25% revenue growth, with order books expanding by 20–30%.
Manufacturing	High	PLI-style incentives exceeding Rs 40,000 crore and import substitution in semiconductors and electronics.	Component manufacturers benefit from 5-8% margin expansion, while the capex cycle improves ROE.
MSMEs	Medium to High sensitivity	Funds and TReDS reduce working capital costs by 2-4% and support equity scale-up.	Invoice discounting improves cash flows by 10-15%, while formalisation aids credit access.
Biopharma	High	SHAKTI outlay accelerates clinical trials and production, supported by rising biologics exports.	Biosimilar companies could see EPS growth exceeding 20%, subject to faster approvals.
Textiles	Medium	Cluster upgrades and fibre self-reliance reduce input costs, supported by export incentives.	Value-added players may achieve 8–12% margin gains, with employment schemes supporting labour availability.
Energy/Climate	Medium	CCUS incentives lower compliance costs and increase demand for green logistics.	Steel and chemical players could see a 5–10% uplift in EBITDA through technology adoption.
Digital/IT	Low to Medium	Tax certainty supports FPI inflows, while data centre capex increases.	Cloud service providers may see steady 5-8% growth, while the STT hike could pressure breaking volumes.
Healthcare/Tourism	Medium	Medical hubs and skill development expand the addressable market, while tourism infrastructure improves occupancy.	Hospitals could derive 10–15% incremental revenue from medical tourism, with allied health services scaling volumes.

Small- and mid-cap companies in high-sensitivity segments are likely to be scrutinised for cash conversion efficiency, with the Union Budget favouring execution-driven businesses over narrative-led ones.

The increase in STT on F&O may impact broking and depository businesses by 5-10% due to lower trading volumes.

Read more: Orange Economy India Budget 2026

Fiscal and Macro Context

Capital expenditure is 7.7% higher than the earlier revised estimates, sustaining the crowding-in effect, with infrastructure spending at around 3% of GDP. Tax reforms under the new Income Tax Act, 2025 (effective April 2026), simplify compliance and are expected to support MSME profitability.

Customs duties favour domestic manufacturing through the removal of inversion structures, although marginal duty hikes on select imports could raise input costs by 1-2%.

Risks and Execution

Global challenges such as trade tensions and supply-chain disruptions increase earnings sensitivity. Execution gaps may cap upside at 5–10% against a potential 15–20%.

The effectiveness of MSME funds and TReDS depends on adoption, while infrastructure gains assume capex utilisation of over 80%. On the positive side, fiscal consolidation and deficit reduction improve investor confidence and support private investment.

*The article is for information purposes only. This is not investment advice.

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