The Reform Express

New Delhi: Union Finance Minister Nirmala Sitharaman on Sunday announced measures to boost manufacturing, offered long-term tax incentives for global data centres, and support for agriculture and tourism as she unveiled a Rs 53.5 lakh crore Union Budget for 2026-27, seen as a long-term blueprint for sustaining growth amid rising global risks.

Shunning populist measures despite five key states, including West Bengal and Tamil Nadu, heading to polls, the Budget signalled continued fiscal consolidation and infrastructure spending.But a hike in securities transaction tax on equity derivatives rattled equity markets, with key indices plunging as much as 2 per cent in the special budget-day trading session, before recovering some ground.

Presenting her record ninth consecutive Budget, Sitharaman, in her nearly 90-minute speech in the Lok Sabha, announced detailed anchor schemes for becoming 'Viksit Bharat' - boosting employment, while combining technologies of the future with legacy industries. The FM said, “The Reform Express is well on its way and will maintain its momentum to help us fulfil our kartavya. Our government has undertaken comprehensive reforms towards creating employment, boosting productivity and accelerating growth.

The Central government is working with the state governments on deregulation and reducing compliance requirements.”

“The first requirement is to sustain the momentum of structural reforms, continuous, adaptive and forward looking. Second, a robust and resilient financial sector is central to mobilizing savings, allocating capital efficiently and managing risks. Third, cutting edge technologies, including AI applications, can serve us as force multipliers for better governance,” she said. Maintaining emphasis on infrastructure development, capital expenditure has been raised to Rs 12.2 lakh crore next year from an already record-high Rs 11.2 lakh crore in FY26. Among the many infrastructure projects announced by the minister was a plan to build 7 high-speed rail corridors, while defence expenditure is up by about a fifth on the year.

Amid geopolitical concerns, fragmentation, and financial tightening across the globe, she said manufacturing will be scaled up across seven priority sectors - pharmaceuticals, semiconductors, rare-earth magnets, chemicals, capital goods, textiles and sports goods - with an emphasis on job creation and technology-driven development. The success of Apple iPhone manufacturing prompted doubling of outlay on electronics manufacturing to Rs 40,000 crore, and a second iteration of the semiconductor mission was mentioned to help build the supply chain. While there were no major changes to personal income-tax slabs, the government announced tax and incentive measures aimed at boosting investment and ease of compliance for the industry. Sitharaman announced a Rs 10,000 crore investment over five years to develop India as a biopharma manufacturing hub, rare earth corridors, textile parks, more container manufacturing, chemical parks, measures to strengthen capital goods manufacturing and efforts to revive 200 legacy industrial clusters, among others, to boost industry.

A major announcement was a 20-year tax holiday for overseas firms providing global data centre services from India, along with a 15 per cent safe harbour on costs for data centre services provided by related entities of foreign cloud firms.

The move is expected to provide tax certainty and operational efficiency for global cloud players, as India attracts large-scale investments from firms, such as Google, Microsoft and Amazon Web Services, which have committed about USD 40 billion in 2025 alone.

The Budget also simplified the customs regime, rationalising exemptions, waiving duties on 17 cancer drugs, easing baggage rules and cutting duty on personal imports to 10 per cent. Support was announced for livestock, fisheries, high-value agriculture and textiles, while tourism proposals included eco-friendly mountain trails in Himachal Pradesh, Uttarakhand and Jammu and Kashmir, and the development of 15 archaeological sites.

To support small businesses, the government proposed a Rs 10,000 crore SME Growth Fund to help scale future champions.

On the fiscal front, the government reiterated its consolidation path, targeting a reduction in the debt-to-GDP ratio to 55.6 per cent next year from 56.1 per cent and the fiscal deficit to 4.3 per cent from 4.4 per cent. It plans to borrow Rs 17.2 lakh crore from bond markets, where yields have firmed amid heavy supply. Tax measures included a hike in securities transaction tax on futures trading to 0.05 per cent from 0.02 per cent and to 0.15 per cent from 0.01 per cent on options, taxing share buybacks as capital gains, cuts in TCS on overseas tours, education and medical expenses, and implementation of the new Income Tax Act from April 1.

At a press conference post-presentation of the Budget, Sitharaman defended the STT increase, saying this was done with a view to discouraging small investors from speculative trading in derivatives.

Other key announcements include raising the investment limit for Persons of Indian Origin (PROI) in Indian listed companies from 5 per cent to 10 per cent, with the aggregate limit increased to 24 per cent from 10 per cent.

To support energy transition, a rare earth corridor is proposed to be established in Odisha, Andhra Pradesh, Kerala and Tamil Nadu, alongside customs-duty exemptions for capital goods used in critical mineral processing.

The Rs 20,000-crore CCUS programme provides a credible pathway to decarbonise power, steel and cement, while extending customs-duty exemptions for nuclear projects till 2035, strengthening long-term base-load stability.