Union Budget 2026: A Pragmatic Approach to Growth

The key test will be whether the government can sustain growth momentum while managing fiscal consolidation. | Image: Shutterstock

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026-27 on February 1, 2026, experts anticipate a disciplined, execution-focused approach. This marks a historic Sunday presentation and her ninth consecutive budget. The emphasis will likely remain on defence as a strategic priority, while railways and broader infrastructure receive consistent allocations to sustain momentum without major spikes.

Context from Previous Budgets

Recent data from the 2025-26 Budget provides essential context. Defence received the highest ministerial allocation at ₹6,81,210 crore (13.4% of total expenditure), including ₹1,80,000 crore for capital outlay (modernisation). Railways saw gross budgetary support around ₹2.52-2.65 lakh crore for capital expenditure, with overall infrastructure capital expenditure at ₹11.21 lakh crore (3.1% of GDP).

Experts view the Union Budget 2026 as reinforcing long-term stability rather than delivering short-term surprises. Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, noted: "A disciplined, growth-oriented budget emphasizing productivity, capital expenditure quality, and policy stability would reinforce India’s long-term investment narrative. The signal matters more than the size."

Defence Sector: Continued Priority on Indigenisation

Defence is expected to remain a core focus, building on trends of rising allocations and a push for self-reliance (Aatmanirbharta). Key drivers include higher domestic procurement, R&D support, export promotion, and reduced import dependency.

Defence Budget Allocation Trend (Recent Years, in ₹ crore):

Year	Total Defence Allocation (₹ crore)	YoY Growth (%)	Capital Outlay (Modernisation, ₹ crore)	Notes
2023-24	~6,09,504 (Actual)	-	-	Strong rise in prior years
2024-25	~6,21,940 (BE) / 6,41,060 (RE)	~5-9%	-	Continued upward trajectory
2025-26	6,81,210	9.53%	1,80,000	Highest ministerial share (13.4%)
2026-27 (Expected)	7.3-7.5 lakh+ (8-10%+ hike anticipated)	8-15% est.	~1.9-2.0 lakh+	Focus on drones, electronics, indigenisation

Sources: PRS India, PIB, expert estimates (Motilal Oswal, Mirae Asset). Trends show consistent double-digit growth in recent years, with experts eyeing an 8-15% increase for FY27 amid geopolitical uncertainties.

This sustained push is expected to benefit private players through long-term orders, improved margins, and export growth.

Railways & Infrastructure: Steady Allocations, Execution Focus

Railways and infrastructure are projected to see steady increases, prioritizing efficient execution over headline hikes. Priorities include freight corridors, rolling stock upgrades, station redevelopment (e.g., Amrit Bharat), and safety enhancements.

Recent Railways Capex/Support Highlights (₹ crore):

Fiscal Year	Gross Budgetary Support / Capex (₹ crore)	Key Notes
2024-25	~2.65 lakh (Total allocation)	High utilisation (~79% by Jan 2025)
2025-26	2.52-2.65 lakh (Capex focus)	Unchanged from prior; emphasis on PPP, electrification
2026-27 (Expected)	Steady ~2.5-3.0 lakh	Freight/rolling stock upgrades; multiplier effects on steel, cement, logistics

Sources: PRS India, PIB, Budget documents. Experts stress project delivery for employment and economic multipliers.

Broader infrastructure, including roads, highways, and urban development, aligns with continuity, supporting overall capital expenditure at approximately 3.1-3.2% of GDP.

Broader Sector Expectations

Other areas in focus include:

• Agriculture: Productivity via irrigation, warehousing, and insurance reforms.
• BFSI: Credit growth and PSU bank recapitalisation.
• Real Estate: Streamlined approvals and tax incentives.
• Healthcare: Emphasis on preventive care and public-private partnerships (PPPs).
  
  

Market participants view the budget as an opportunity to reinforce India's growth story through targeted support, especially in defence, infrastructure, and railways, while balancing fiscal consolidation. With the presentation just weeks away, stakeholders are watching closely for how these priorities translate into actual allocations and policy measures to sustain momentum toward a Viksit Bharat.

This pre-budget outlook underscores a pragmatic approach: prioritizing quality execution and structural reforms over headline-grabbing expenditures in a challenging global environment. Investors and industry leaders alike see steady sectoral support as key to maintaining India's economic resilience.

In conclusion, the Union Budget 2026 is poised to reflect a commitment to sustainable growth and strategic investments. The focus on defence, infrastructure, and other critical sectors will be vital for India's long-term economic trajectory. The upcoming budget will serve as a crucial indicator of the government's priorities and its ability to navigate complex economic challenges.