Budget 2026: Sitharaman bets on manufacturing, defence, and the ₹12 lakh tax-free threshold

Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, positioning it as the blueprint for "Viksit Bharat" — the government's vision for a developed India by 2047. The budget is expansionary, reform-heavy, and explicitly targeted at the middle class, manufacturing sector, and defence establishment.

The ₹12 Lakh Slab Reform

The headline announcement: individuals earning up to ₹12 lakh per annum will pay zero income tax. This is the most significant slab reform in over a decade, designed to put money back in the hands of India's salaried middle class — an estimated 40 million taxpayers who will see their effective tax rate drop to zero.

The political calculus is transparent: with several state elections on the horizon, the tax relief targets the urban, aspirational voter who has been the BJP's base but has grown restless over inflation, stagnant real wages, and rising costs of education and healthcare.

₹11.2 Lakh Crore for Infrastructure

Capital expenditure has been raised to ₹11.2 lakh crore — the highest in India's history. The allocation targets:

• Railways: Expanded Vande Bharat network, high-speed rail corridor progress
• Defence: ₹6.2 lakh crore for defence (3.4% of GDP), with emphasis on indigenisation under 'Make in India'
• Highways: 12,000 km of new national highways targeted for 2026-27
• Semiconductor and AI: Dedicated allocations for ISM 2.0 and IndiaAI Mission 2.0

Women-Led Development

A new initiative — "Nari Shakti Udyam Yojana" — earmarks ₹15,000 crore for women-led micro and small enterprises, with subsidised credit, skill development centres, and digital literacy programmes. The government cited data showing women-led enterprises growing at 28% year-on-year, outpacing the broader MSME sector.

Opposition Response

The Congress party criticised the budget for failing to address unemployment beyond headline figures, arguing that job creation was concentrated in informal, low-wage sectors. Rahul Gandhi called it a "repackaging of old schemes" and demanded an independent employment audit. The Opposition also raised concerns about the fiscal deficit — projected at 4.4% of GDP — arguing it remains structurally high for an economy aspiring to investment-grade sovereign ratings.

The Longer View

PM Modi, in a post-budget parliamentary address, urged the nation to view Budget 2026 not as a single-year exercise but as the "first budget of the second quarter of the 21st century." The framing is deliberate: it positions the Modi government as thinking in generational terms, building infrastructure and institutions that will compound over decades. Whether the economy delivers on that promise will be judged by voters long before 2047.