The India Budget 2026–27 is designed to re-architect the Indian economy over the next 10–15 years and may not comfort the markets. The recent market correction reflects a familiar mismatch: long-gestation structural reforms meeting short-horizon capital.
At its core, this is a Budget about economic growth, inclusivity and productivity not near-term stimulus. India is a $4.3–$4.5 trillion economy. The policy choices now underway aim to make India a $12–14 trillion economy by 2036.
The government’s focus on scaling manufacturing across seven strategic sectors biopharma, capital goods, electronics, semiconductors, rare-earth magnets, container manufacturing and textiles signals a shift from assembly-led growth to strategic industrial sovereignty. Manufacturing contributes 17 per cent of GDP and employs 60 million people. Raising its share to even 22–25 per cent by the early 2030s could add $1.5–2 trillion to GDP while absorbing millions of semi-skilled workers.
The emphasis on rare-earth magnet corridors is crucial. India currently imports over 90 per cent of its rare-earth processing requirements, even as demand rises from EVs, renewable energy and defence electronics. Securing this node is not industrial policy alone; it is strategic risk mitigation.
India’s 63 million MSMEs employ 110–120 million people but contribute only 17 per cent of GDP. Output per worker in Indian MSMEs at $6,000– 7,000 annually, is less than half of Vietnam or China.
The Budget’s proposal to create ‘Champion MSMEs’ anchored in government procurement directly addresses this productivity gap. A 15–20 per cent improvement in MSME productivity adds Rs 4–5 lakh crore of annual output and materially raise median wages. Infrastructure is economic plumbing. Logistics costs are down from 14 per cent of GDP a decade ago to 8 per cent today, saving the economy an estimated $80–100 billion annually. Further investments in freight corridors, inland waterways and coastal shipping aim to push this closer to 7 per cent. Inland waterways offer freight costs 30–40 per cent lower than road transport.
Growth remains metro-centric even though nearly 65 per cent of India’s population lives outside major metros. The move towards smaller towns as economic regions is distributed urbanisation. With India’s urban population projected to rise from about 36 per cent today to over 42 per cent by 2036, getting this geography right will make urbanisation a dividend.
Credit intensity in India remains modest at 55–60 per cent of GDP, far below advanced economies. The proposed Banking for Viksit Bharat Committee signals a shift toward funding long-cycle infrastructure and manufacturing, without abandoning prudence.
The Budget’s technology narrative spanning agriculture, education and employment is outcomes driven. With 25 crore people having exited multidimensional poverty over the last 15 years, the next challenge is productive, dignified employment. India adds 8–10 million people to its workforce annually. The proposed Education–Employment–Enterprise continuum recognises that skilling without jobs and jobs without enterprise creation, cannot absorb this flow.
Education is increasingly framed as economic infrastructure. University townships near industrial corridors, apprenticeships, STEM expansion and girls’ hostels aim to raise employability from current levels of around 45–50% to over 65 per cent, improving returns on human capital while increasing women’ participation in the workforce.
Agriculture still employs about 45 per cent of the workforce while contributing only 16–18 per cent of GDP.
The Budget’s shift toward productivity-led income growth, high-value crops and agri-processing reflects a realistic goal: raising income per worker rather than forcing rapid exits from farming.
This budget prioritises capacity over comfort and if executed with discipline will lift India as a robust economy. History tends to be kinder to such Budgets than markets are on day one.
— Ravichandran is chairperson of eVidyaloka Trust