Union Budget 2026: Ten Key Expectations as India Eyes Third-Largest Economy Status

As Finance Minister Nirmala Sitharaman prepares to present Union Budget 2026, expectations run high for a transformative economic document that could accelerate India's journey to becoming the world's third-largest economy. The budget arrives amid inflationary pressures, employment challenges, and global uncertainties.

Analysts anticipate the government will attempt to balance growth with fiscal stability through ten major policy initiatives.

GDP Measurement Overhaul

With India maintaining a robust 7.4 percent growth rate, the Finance Minister may announce 'Third Generation Economic Reforms.' A significant change involves updating the GDP base year from 2011-12 to 2022-23, better reflecting the weight of e-commerce, gig economy, and renewable energy sectors that the old methodology failed to capture accurately.

Fiscal Deficit Target at 4.0 Percent

Following successful achievement of the 4.4 percent deficit target last fiscal year, the government is expected to present a roadmap reducing the deficit to 4.0 percent or below. Lower government borrowing would reduce interest payments, freeing funds for development while making private sector credit more accessible and affordable.

Historic ₹12.4 Lakh Crore Capital Expenditure

Infrastructure investment is projected to increase 10.3 percent to ₹12.4 lakh crore, encompassing 400 new Vande Bharat trains, expressways connecting over 300 districts, and semiconductor fabrication plant infrastructure. The investment targets digital and green infrastructure alongside traditional roads and bridges.

Middle Class Tax Relief

The Finance Ministry is reportedly considering increasing standard deduction from ₹50,000 to ₹100,000. Income up to ₹13 lakh may become completely tax-free under the new regime, boosting purchasing power and stimulating demand in automobiles and real estate sectors.

₹3 Lakh Crore Agricultural Package

Rural India may receive substantial stimulus through a 50 percent increase in PM-Kisan payments (from ₹6,000 to ₹9,000), subsidies on Nano Urea and Nano DAP, and interest-free agricultural loans up to ₹5 lakh for 77 million farmers. Creation of 10,000 new Farmer Producer Organizations is also anticipated.

Disinvestment Policy 2.0

The government will focus on monetizing assets of loss-making PSUs rather than outright sales. Disinvestment of IDBI Bank, Shipping Corporation, and BEML is expected within this fiscal year, with ₹50,000-75,000 crore targeted for investment in future technologies.

Health Budget Surge

A 15 percent increase in health allocation may fund the second phase of new medical colleges, adding 75,000 seats. The 'National Cancer Care Grid' could establish oncology clinics in every district, while a ₹5,000 crore Innovation Fund would support medical research and affordable medicine development.

Youth Employment Initiative

A new 'National Internship Scheme' may provide one-year paid internships in top 500 companies with cost-sharing between government and industry. The Mudra Yojana loan limit may increase from ₹20 lakh to ₹30 lakh to encourage youth entrepreneurship.

MSME Credit Expansion

Guarantee-free loan limits under the Credit Guarantee Scheme will likely increase, alongside 'District Export Hubs' funding and 'Digital Adoption Subsidies' to help small industries compete globally and list on e-commerce platforms.

Green Energy and Clean Mobility

The FAME-III scheme promoting electric vehicles, particularly buses and charging infrastructure, may launch alongside ₹15,000 crore additional allocation for the Green Hydrogen Mission. Solar Rooftop Scheme expansion could benefit over 10 million households.