Economy, Budget & Banking 2026

1. Union Budget 2026-27

Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 in the Lok Sabha on 1 February 2026 (a Sunday). The Budget was built around three 'kartavyas' (duties) and a strong push for manufacturing and infrastructure.

The three kartavyas

• First: speed up and sustain economic growth.
• Second: build people's capacity and meet their aspirations.
• Third: make sure every family, region and sector can reach resources and opportunities.

Key numbers (Budget Estimates 2026-27)

• Total expenditure: Rs 53.5 lakh crore. Non-debt receipts: Rs 36.5 lakh crore.
• Fiscal deficit target: 4.3% of GDP for 2026-27 (revised estimate for 2025-26: 4.4%).
• Central government debt target: 55.6% of GDP (56.1% in 2025-26 RE).
• Public capital expenditure (capex): Rs 12.2 lakh crore.
• Rs 1.4 lakh crore as 16th Finance Commission grants to states for 2026-27.

Manufacturing and technology announcements

• India Semiconductor Mission 2.0 (ISM 2.0) to be launched.
• Electronics Components Manufacturing Scheme outlay raised to Rs 40,000 crore.
• Biopharma SHAKTI: Rs 10,000 crore over 5 years, with 3 new NIPERs and upgrading of 7 existing ones.
• Rare earth corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu.
• SME Growth Fund of Rs 10,000 crore for small and medium businesses.

Infrastructure announcements

• Seven high-speed rail corridors: Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi and Varanasi–Siliguri.
• A new dedicated freight corridor from Dankuni (east) to Surat (west).
• 20 new National Waterways to be made operational over 5 years.
• Carbon capture, utilisation and storage (CCUS): Rs 20,000 crore over 5 years for hard-to-abate sectors such as steel and cement.
• City Economic Regions: Rs 5,000 crore per region over 5 years.

💡 Learn the 'big four' Budget numbers together: fiscal deficit 4.3%, capex Rs 12.2 lakh crore, total spending Rs 53.5 lakh crore, debt 55.6% of GDP.

📝 5-question quiz on this lesson: enrol free to take it and track your score.

2. Taxes and Trade Deals in 2026

On 1 April 2026 India switched to a brand-new income-tax law. The year also saw a big trade deal with the European Union and a trade agreement with the UK coming into force.

Income-tax Act, 2025 comes into force

• The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026.
• Parliament passed it in August 2025, and the President gave assent on 21 August 2025.
• It uses a single 'Tax Year' in place of the old 'Previous Year' and 'Assessment Year'.
• It is shorter: 536 sections, 23 chapters and 16 schedules (the 1961 Act had over 800 sections).
• The focus is simpler language; Budget 2026-27 said simpler rules and forms would follow.

Tax changes in Budget 2026-27

• Securities Transaction Tax (STT) on futures raised from 0.02% to 0.05%; on options premium from 0.1% to 0.15%.
• TCS on overseas tour packages cut to 2%; TCS on money sent abroad for education and medical treatment under LRS cut to 2%.
• Minimum Alternate Tax (MAT) rate cut from 15% to 14%.
• Customs duty on goods imported for personal use cut from 20% to 10%.
• Tax holiday until 2047 for foreign cloud service companies using data centres in India.

Trade agreements

• India–EU Free Trade Agreement: talks were concluded and announced on 27 January 2026 at the India–EU summit in New Delhi. Leaders called it the 'mother of all deals'. It still needs legal checks and approvals before it comes into force.
• India–UK Comprehensive Economic and Trade Agreement (CETA), signed in July 2025, came into force on 15 July 2026.
• Under CETA, about 99% of India's exports get zero-duty access to the UK.
• A Double Contribution Convention agreed with the UK alongside CETA means temporary Indian workers in the UK need not pay social security in both countries.

💡 Do not mix up 'concluded' and 'in force': the India–EU deal was concluded in January 2026, while the India–UK CETA actually came into force in July 2026.

📝 5-question quiz on this lesson: enrol free to take it and track your score.

3. RBI, Inflation and GDP Data 2026

The Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, kept rates steady for most of 2026 and then raised the repo rate in October as inflation rose. Growth stayed strong according to official GDP data.

RBI monetary policy in 2026

• The repo rate was 5.25% at the start of 2026 and stayed there through the February, April, June and August reviews.
• On 7 October 2026 the Monetary Policy Committee (MPC) raised the repo rate by 25 basis points to 5.50%, the first hike since February 2023.
• After the hike: Standing Deposit Facility (SDF) 5.25%; Marginal Standing Facility (MSF) and Bank Rate 5.75%.
• The stance was changed from 'neutral' to 'calibrated tightening'.
• The RBI's reason: CPI inflation had risen to 4.8% in August 2026, above the 4% target, with risks from food and fuel prices, crude oil and a weak monsoon.

RBI projections (October 2026)

• Real GDP growth for 2026-27 projected at 7.1%.
• CPI inflation for 2026-27 projected at 5.2%.
• The MPC has six members; the Governor chairs it. India's inflation target is 4% with a band of 2% to 6%.

GDP data

• MoSPI released the first-quarter (April–June 2026) GDP data at the end of August 2026: real GDP grew 7.8%.
• Gross Value Added (GVA) grew 8.2% in the same quarter, led by services.
• Nominal GDP grew 10.3% to about Rs 88.27 lakh crore in the quarter.
• GST continues with the simpler structure started on 22 September 2025: mainly two slabs of 5% and 18%, with 40% for a few luxury and 'sin' goods.

💡 Remember the corridor: SDF is 25 basis points below repo, MSF is 25 basis points above repo. If repo is 5.50%, SDF is 5.25% and MSF is 5.75%.

📝 5-question quiz on this lesson: enrol free to take it and track your score.