India’s Union Budget for the financial year 2027 will be presented by Union Finance Minister Nirmala Sitharaman on February 1, 2026 and she will start presenting the budget from 11 AM in the parliament. The budget is a yearly event where the finance minister will give the blueprint on government policies on various sectors, taxation, spending priorities to steer the economy towards growth and stability. The Union Budget for FY2026-27 is quite important as India has been facing headwinds amid the ongoing tariff war and geopolitical situation. Let us know what each sector is expecting from the government in this blog.

Defence 

Amid the ongoing tense geopolitical situations and security concerns from India’s neighbouring countries, the government would like to spend significantly toward domestic defence production as the government continues to prioritize reducing dependence on imports for defence equipment.

The government would be looking at strengthening and integrating defence production, building robust infrastructure for defence manufacturing and high-tech manufacturing. With India’s strong vision of continuing to be self-reliant (Atmanirbhar) in defence and to position the country as a hub for the production of advanced military technologies and equipment, the government is expected to continue to spend significantly for defence sector.

In 2025, India’s defence sector has performed well, with the Defence Acquisition Council approving major purchases totalling over ₹3.84 lakh crore. This has helped to strengthen India’s defence readiness and also focused on building more domestic capabilities and reducing dependence on imports from foreign suppliers.

Railways

Railways is one of the important sectors on which the Indian government focuses as it is used by crores of Indians as the go-to mode of transportation on a daily basis. The upcoming budget is expected to increase railway allocations by approximately 10% from Rs 2.52 trillion to Rs 2.75 trillion. The main focus would be on new line construction, improving safety and protection systems, particularly via the KAVACH system, enhancing capacity through gauge conversion, track doubling, etc. The budget will support the engineering, procurement, and construction (EPC) of advanced coaches and the Namo Bharat Rapid Rail service.

The government would be looking at encouraging private sector investments on viable projects like freight corridors, passenger and freight terminals.

Increasing the number of Vande Bharat trains by improving the ecosystem and upgrading tracks will be on the government’s radar. The government is expected to increase investments in wagons and new technologies that will enable higher speeds on Dedicated Freight Corridors (DFC).

The government would like to incentivise domestic manufacturing companies for producing railway components and other ancillaries through schemes like PLI, export promotion, and EXIM support.

Highways and Roads

The industry leaders expect the government to continue spending on building highways and roads across the country with a greater focus on quality. This includes incentives for modern construction technologies and skilling people for efficient operations and maintenance. The industry also expects the government should try to complete projects  faster and realise tangible benefits at the earliest. The government should draft policies so that the financial options for the industry becomes broader and reliance on trading banking system is decreased. The policies should pave way for developing new financial products, enhancing guarantees and insurance products for the industries and making infrastructure bonds more appealing for institutional investors.

Aviation

Industry experts anticipate the Indian government will continue to create favourble policies to improve airport infrastructure. They expect the government to spend more to boost regional connectivity by building new airports in tier-2 and tier-3 cities and expanding existing ones under the UDAN initiative for affordable air travel.

After the IndiGo fiasco in December 2025, the industry expects the government to come out with major announcements to attract more new companies to start operation of new airlines.  This may include new licenses and tax breaks for initial years for investors and newcomers. Aviation fuel is a major contributor to the operating cost of an airline and any changes to aviation fuel taxation like including it under GST or reducing state VAT could benefit airlines. The budget may also address improvements in air traffic management, operation and maintenance as well as training capabilities.

Shipping

India has a long coastline and stakeholders from the shipping sector want the government to tap into the opportunities present in this sector. It expects the government to continue spending to strengthen the shipping sector through Sagarmala programme.

Industry members want affordable and long-term financing  for big port and shipbuilding projects that take a long time to pay off. The industry expects faster customs processing, better port logistics and improved connections for transporting goods. The government should continue its support for domestic shipbuilding and repair services and decrease the dependence on foreign companies.  

Agriculture

With a population of more than 1.4 billion, food security for India is important and the government has been strongly focusing on it for the past few years. However, significant opportunities remain untapped and the government can look at those areas for strengthening the agriculture sector.

The Union Budget 2026 is expected to prioritize efforts in improving production and distribution of edible oilseeds and pulses through introducing a new Seeds Bill. It will also frame policies for improving crop diversification and modernizing storage infrastructure such as cold chains and warehouses. These measures are driven by the goals of improving farm productivity, enhancing the PM-KISAN scheme, increasing the quality and contribution of the agricultural sector to India’s GDP. The government might expand support for crop insurance and investment in irrigation technology.

Manufacturing

The manufacturing industry, which is capital intensive and labour intensive, is anticipating time-bound tax incentives along with rationalising customs and excise duties. This is expected to reduce costs, improve cash flows and working capital, enhance competitiveness of domestic manufacturing companies, support indigenisation and encourage private investments.

Stakeholders from the industry also expect faster and easy access to institutional credit, especially, for micro and small enterprises (MSMEs). Stronger credit guarantee mechanisms from the government may support first-time borrowers, informal businesses, micro and rural enterprises.

Healthcare

While last year’s budget allocated over Rs 1 lakh crore for the healthcare sector, actual spending is really low in percentage terms to the country’s GDP. The industry is counting on the government to prioritize primary care, strengthen public health infrastructure and address increasing cases of non-communicable diseases. The industry expect this year’s budget to increase funding for Ayushman Arogya Mandirs, PM-ABHIM, and digital health, with a focus on preventive care, NCD screening, and chronic disease management.

Incentives for private investment and outcome-linked funding are needed to improve efficiency. Regulatory clarity for digital therapeutics and telemedicine is also essential. A balanced approach will ensure a strong, affordable and accessible health system.

Real Estate

Realty developers are seeking reforms from the government to improve affordability for homebuyers. They want the government to rationalize taxation, bring in policies to improve liquidity and support steady long-term growth. They would like to see the government reduce GST burdens for homebuyers and provide incentives like increasing tax exemptions linked to interest paid by homebuyers. They expect the government to address both supply-side constraints as well as prop-up demand by revising housing policies based on rising land price, higher construction costs, shifting buyer preferences and the contribution of real estate sector to India’s economic growth.

Technology

There is an increasing expectation from the government to expand production-linked schemes and infrastructure support to emerging technologies such as big data, artificial intelligence, machine learning, robotics and deep-tech manufacturing.

This can build capabilities needed to drive innovation and scalability in other sectors also. Enabling seamless integration of AI into critical sectors like agriculture, finance, education, logistics, healthcare, etc. will improve the overall productivity in the respective sectors.

As these technologies become central to innovation and competitiveness, greater budget allocations are anticipated to support research and development that will boost productivity and efficiency leading to economic development.

Renewable Energy

The renewable energy sector is expecting the Indian government to come out with clear policies that are aimed at accelerating solar manufacturing capacity and reduce reliance on imports. This will align with the government’s aim of Atmanirbhar (self-sufficiency) in clean energy production. They should also focus on energy storage facilities infrastructure to give a boost to the sector.

The industry also expects continued focus on green hydrogen and clean industrial energy usage through policies such as a Production Linked Incentive (PLI) scheme to boost domestic manufacturing.

Automobile and Electric Vehicles

The number of electric vehicles on Indian roads is increasing every year. So, the automobile industry anticipates the Indian government will focus on electric vehicles as part of the transition from ICE to clean mobility. This includes expanding electric vehicle (EV) charging networks across urban, semi-urban and rural areas. Furthermore, clean mobility solutions should be integrated into public transport systems and urban planning for seamless adoption by the public.

Long-term investment in electric vehicles (EVs) and ancillary components is necessary and for that the government should frame consistent and reliable policies. Production Linked Incentive (PLI) scheme should be introduced for a broader range of EV-related products. This would encourage new companies and more manufacturers to participate. The government should encourage domestic companies to manufacture batteries in India by giving them incentives and tax breaks. They should also look at recycling batteries to minimize wastages and any environmental hazard.

Additionally, introducing incentives such as EV loan tax breaks, lower interest rates through priority lending programs and reducing the Goods and Services Tax (GST) on EV spare parts can significantly improve affordability for consumers and businesses alike.

Banking

The banking industry is expecting the government would bring in tax exemptions for customer to encourage deposits as the total bank deposits as a share of household financial savings has fallen in FY25 compared to FY24. A recent report by State Bank of India suggested a few measures to boost financial savings like tax treatment for interest on deposits should be at par with LTCG and STCG, lock-in period for tax savings FD may be made equal to ELSS of Mutual funds (3 years) and TDS on Savings Bank Deposits interest threshold be raised.

Insurance

The report by SBI says the industry expects a few initiatives from the government to give a fillip to the insurance sector. It wishes the government to Introduce a separate deduction for Term/Health insurance under the new or old tax regime, amounting to Rs 25,000 or Rs 50,000 respectively, in alignment with the existing NPS deduction under Section 80CCD(1B), or under the 80D deduction in the new tax regime.

There has been a growing number of complaints in the health insurance sector, where IRDAI reports a significant rise in FY25 that is related to claim processing. This highlights the need for sector-wide reforms to improve claim settlement and customer experience.

More distribution channels through digitization and bancassurance models must be promoted. The government should frame policies that emphasize digital channels and e-commerce platforms, and leverage online ecosystems to reach more Indians particularly in remote areas and improve customer accessibility.

Conclusion

The Indian government is expected to focus on the critical sectors that is important for boosting economic development and promoting steady sustainable growth. The government also aims at improving the per capita income of its citizen and enhancing the quality of life for its citizens. Through the budget 2026, the Indian government would like to strike a balance between promoting growth and maintaining fiscal discipline. It is expected to prioritize capital expenditure, simplify regulations and push structural reforms to boost investor confidence and attract investments.