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2 Feb 2026·Source: The Hindu
4 min
EconomyNEWS

Union Budget 2026: Capital Expenditure Target Set at ₹12.2 Lakh Crore

Budget 2026 focuses on productivity, employment, and global market integration for growth.

Union Budget 2026: Capital Expenditure Target Set at ₹12.2 Lakh Crore

Photo by Georg Eiermann

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026, emphasizing increased productivity and employment generation. The budget aims for deeper integration with global markets and attracting long-term investment. Several customs duty reductions are planned to boost exports in marine, leather, and textile products, along with infrastructure projects. The Centre's capital expenditure target is set at ₹12.2 lakh crore in 2026-27, up from ₹10.9 lakh crore in the Revised Estimates of 2025-26. No major direct tax rate relaxations were announced. The budget is structured around three kartavyas or duties: accelerating economic growth, fulfilling people's aspirations, and ensuring access to resources for all.

Key Facts

1.

Capital expenditure target: ₹12.2 lakh crore (2026-27)

2.

Customs duty reductions: Marine, leather, textile products

UPSC Exam Angles

1.

GS Paper III - Indian Economy: Government Budgeting

2.

Connects to syllabus topics like Fiscal Policy, Taxation, Infrastructure Development

3.

Potential question types: Statement-based, analytical questions on budget allocation and its impact

Visual Insights

More Information

Background

The Union Budget is a crucial economic document presented annually by the Finance Minister. Its origins can be traced back to British India, with the first budget presented in 1860 by James Wilson. Post-independence, the budget became a tool for planned economic development, reflecting the socialist ideals of the time. The budget preparation involves several stages, including estimations by various ministries and departments, followed by scrutiny by the Ministry of Finance. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 aimed to bring fiscal discipline and reduce the fiscal deficit. Over the years, the budget has evolved from a mere statement of accounts to a comprehensive policy document. Key milestones include the abolition of the separate Railway Budget in 2017, merging it with the General Budget. This aimed to streamline the budgetary process and improve efficiency. The introduction of the Goods and Services Tax (GST) in 2017 also significantly impacted the budget, altering the indirect tax landscape. The budget is presented to the Parliament, where it is debated and voted upon. The Appropriation Bill authorizes the government to withdraw funds from the Consolidated Fund of India. The legal and constitutional framework governing the budget is enshrined in Article 112 of the Indian Constitution, which mandates the presentation of the Annual Financial Statement (budget) before the Parliament. The budget process is also guided by various rules and regulations framed by the Parliament and the Ministry of Finance. The budget is not just a financial statement but also a reflection of the government's economic priorities and policy direction. The budget impacts various sectors of the economy, including agriculture, industry, and services.

Latest Developments

In recent years, the Union Budget has increasingly focused on infrastructure development and social sector spending. The government has launched several initiatives like PM Gati Shakti National Master Plan to improve infrastructure connectivity and reduce logistics costs. The emphasis on digital infrastructure has also grown, with initiatives like Digital India promoting digital literacy and financial inclusion. The budget also reflects the government's commitment to sustainable development and climate action. There are ongoing debates about the optimal level of government spending and the fiscal deficit. Some economists argue for increased government spending to boost economic growth, while others emphasize the need for fiscal consolidation to maintain macroeconomic stability. The Reserve Bank of India (RBI) plays a crucial role in managing inflation and maintaining financial stability. The NITI Aayog provides policy inputs and recommendations to the government on various economic and social issues. Looking ahead, the Union Budget is expected to continue to focus on promoting economic growth, creating jobs, and improving the quality of life for citizens. The government has set ambitious targets for infrastructure development, renewable energy, and digital transformation. The budget will also need to address challenges such as rising inflation, global economic uncertainty, and climate change. The budget is a dynamic document that evolves in response to changing economic and social conditions.

Frequently Asked Questions

1. What is the capital expenditure target set in Union Budget 2026, and why is it important for UPSC Prelims?

The capital expenditure target is ₹12.2 lakh crore for 2026-27. It's crucial for Prelims as it reflects the government's investment priorities and economic growth strategy, which are frequently tested.

Exam Tip

Remember the capital expenditure figure (₹12.2 lakh crore) for direct questions in Prelims. Understand its implications for economic growth.

2. What are the 'kartavyas' mentioned in the Union Budget 2026, and how are they relevant to Mains?

The budget is structured around three 'kartavyas': accelerating economic growth, fulfilling people's aspirations, and ensuring access to resources for all. These are relevant to Mains as they represent the government's policy priorities and guiding principles, which can be discussed in answers related to economic development and social justice.

3. What is the focus of Union Budget 2026?

The Union Budget 2026 focuses on increased productivity, employment generation, and deeper integration with global markets to accelerate economic growth.

4. How does capital expenditure differ from revenue expenditure, and why is the former emphasized in Budget 2026?

Capital expenditure creates assets (e.g., infrastructure), while revenue expenditure covers day-to-day operational expenses. Budget 2026 emphasizes capital expenditure to boost long-term economic growth and productivity.

5. What are the potential benefits and drawbacks of the Union Budget 2026's focus on global market integration?

Potential benefits include increased exports, foreign investment, and access to new technologies. Drawbacks may include increased competition for domestic industries and vulnerability to global economic fluctuations.

6. How might the customs duty reductions in marine, leather, and textile products impact the Indian economy?

Customs duty reductions aim to boost exports in these sectors, leading to increased production, employment, and foreign exchange earnings. This can improve the competitiveness of Indian products in the global market.

7. Why is the Union Budget 2026 in the news recently?

The Union Budget 2026 is in the news due to its focus on capital expenditure, productivity, and global market integration as key drivers of economic growth. The specific targets and policy changes are being analyzed by economists and policymakers.

8. What are the recent developments related to infrastructure projects mentioned in the Union Budget 2026?

The budget emphasizes infrastructure projects to improve connectivity and reduce logistics costs. These projects are likely aligned with initiatives like PM Gati Shakti National Master Plan.

9. What is the historical background of Union Budget in India?

The Union Budget's origins can be traced back to British India, with the first budget presented in 1860 by James Wilson. Post-independence, it became a tool for planned economic development.

10. What is the significance of the increase in the capital expenditure target from the Revised Estimates of 2025-26 to the Budget Estimates of 2026-27?

The increase from ₹10.9 lakh crore to ₹12.2 lakh crore signifies a greater emphasis on investment in infrastructure and asset creation, which is expected to have a multiplier effect on economic growth and employment generation.

Practice Questions (MCQs)

1. Consider the following statements regarding the Union Budget 2026, as presented in the news: 1. The Centre's capital expenditure target is set at ₹12.2 lakh crore. 2. The budget includes major direct tax rate relaxations. 3. The budget aims for deeper integration with global markets and attracting long-term investment. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.1 and 3 only
  • C.2 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: B

Statement 1 is CORRECT: The Centre's capital expenditure target is indeed set at ₹12.2 lakh crore for 2026-27, as stated in the news summary. Statement 2 is INCORRECT: The news explicitly mentions that no major direct tax rate relaxations were announced in the budget. Statement 3 is CORRECT: The budget aims for deeper integration with global markets and attracting long-term investment, as highlighted in the news.

2. The Union Budget 2026 is structured around three 'kartavyas' or duties. Which of the following is NOT one of those duties, as per the provided news summary?

  • A.Accelerating economic growth
  • B.Fulfilling people's aspirations
  • C.Ensuring access to resources for all
  • D.Promoting environmental sustainability
Show Answer

Answer: D

The news summary explicitly mentions three 'kartavyas': accelerating economic growth, fulfilling people's aspirations, and ensuring access to resources for all. Promoting environmental sustainability is not mentioned as one of the three core duties in the provided summary.

3. Consider the following statements regarding the Fiscal Responsibility and Budget Management (FRBM) Act, 2003: 1. It mandates the central government to reduce the fiscal deficit to 3% of GDP. 2. It aims to promote fiscal discipline and reduce the government's debt burden. 3. It was enacted in response to the economic crisis of 1991. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.1 and 3 only
  • C.2 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is CORRECT: The FRBM Act, 2003 does mandate the central government to reduce the fiscal deficit to 3% of GDP (although this target has been revised and deferred over time). Statement 2 is CORRECT: The FRBM Act aims to promote fiscal discipline and reduce the government's debt burden. Statement 3 is INCORRECT: The FRBM Act was enacted in 2003, not in response to the 1991 economic crisis. The 1991 crisis led to economic reforms and liberalization.

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