Union Budget 2026

Cities occupy barely 3% of the land surface but generate close to 60% of GDP.  For a rapidly urbanising country like India, this makes large-scale, well-planned investment in cities a simple economic imperative. The challenge is to do this while grappling with pollution, congestion, hygiene, safety, ageing populations, and rising expectations of convenience.

By 2030, India is expected to have at least seven megacities with populations above 10 million and over 60 cities with more than 1 million residents.  All of them will demand affordable, fast, clean, and reliable public transport—just as fiscal space remains tight. Urban development is constitutionally a state subject, but the Union Government plays a critical role in enabling metro systems, electric buses, and other mass transit investments.

The question, therefore, is not whether the Centre should support urban transport, but what more it can do to accelerate sustainable, citizen-centric mobility. Five priorities stand out:

• The budgets should mandate transport models for all cities projected to be million-plus Cities by 2030 to ensure that dynamic and live, city-wide integrated transport and land-use models enable testing of the impact of proposed projects, simulate policy changes and prioritise investments based on measurable outcomes, and solve congestion by treating it not just as a transport problem but equally as a land-use and demand-management problem. For all million-plus cities, the Centre should make access to major urban transport funds contingent on:
  • Establishing and regularly updating integrated transport and land-use models
  • Using these models to appraise major projects (metros, BRT , elevated corridors, large road widening)
  • Periodically reviewing and updating comprehensive mobility plans based on real-world performance, not just as one-time documents
• Create a Central ‘nudge unit’ for urban behaviour and design to understand what prompts civic discipline and safer behaviour, and then embedding those insights into standards, funding conditions, and capacity-building programmes. This will ensure that infrastructure is used as intended by studying how people actually use streets and public spaces, identifying design elements that improve compliance and safety (e.g. traffic calming, nudges for correct lane use, safer crossings), developing model design guidelines and low-cost interventions that cities can adopt, and evaluating existing assets (overpasses, subways, crossings) for usability and redesign where needed.

• Create five-year rolling capital commitments via non-lapsable funds: Large urban transport projects—metros, BRT corridors, depots, multimodal hubs—require long-term capital visibility. Yet, the current system of annual, stop–go budgeting creates uncertainty. Private contractors invest heavily in tunnelling machines, casting yards, and specialised equipment, and delayed or unpredictable payments increase their risk, which ultimately shows up as higher bid prices. To address this, the Centre should:
  • Create a non-lapsable urban transport fund under the Ministry of Housing and Urban Affairs (MoHUA) with five-year rolling capital commitments
  • Provide multi-year sanction letters for approved projects, clearly laying out expected central disbursements
  • Enable faster, more predictable flow of funds directly to city or metro rail corporations, subject to agreed milestones and governance standards
• Create an operations and maintenance challenge fund: Indian cities invest heavily in creating new assets—roads, flyovers, metros, depots, electric bus fleets—but far less in maintaining and operating them well. The result is a ‘build–neglect–rebuild’ or ‘buy–neglect–repurchase’ cycle that destroys value and erodes public confidence. The Union Budget can help correct this bias by setting up an operations and maintenance (O&M) challenge fund for urban transport. The key features could include:
  • Annual fund allocations tied to a standardised asset management index
  • Eligibility based on transparent metrics: asset condition, preventive maintenance practices, safety performance, financial sustainability
  • Incentives for cities that adopt robust asset management systems, ring-fence O&M budgets, and meet performance benchmarks
  • Such a fund would signal that maintaining existing assets is as important as building new ones, and reward cities that treat O&M as a core responsibility rather than an afterthought.
• A common technology framework and skilling ecosystem: Urban transport technologies such as advanced traffic management systems (ATMS), intelligent transport systems (ITS), fare collection platforms, fleet management systems, and ADAS  solutions are evolving rapidly. This brings opportunities, but also the risks of technological obsolescence, vendor lock-in, and fragmented, incompatible systems across cities. To manage this complexity, the Centre should promote a common technology framework that:
  • Sets out reference architectures and standards for data, interfaces, and cybersecurity
  • Encourages open, interoperable systems instead of proprietary silos
  • Includes guidelines for lifecycle costing, upgrades, and integration with emerging platforms (e.g. mobility-as-a-service, open loop payments)

Complementing this, MoHUA should support regional skilling centres focused on installation, operation, and maintenance of urban transport technologies. This will help cities manage systems in-house or as informed clients, rather than being fully dependent on vendors.

• World-class aviation infrastructure: In line with Viksit Bharat @2047, India will develop a future-ready aviation ecosystem by building new airports, expanding metropolitan aviation hubs, and modernising existing airports through public–private partnerships (PPs) to support long-term economic growth. The number of PPPs is expected to increase from 14 to 25 in the next 2 years in line with the National Monetisation Pipeline (NMP).
• Inclusive and balanced regional connectivity: The UDAN scheme will be further strengthened to ensure affordable and reliable air connectivity for all regions, with focused interventions for hilly, remote, and North-Eastern areas, promoting balanced regional development.
• Rationalisation of aviation fuel taxation: To enhance efficiency and competitiveness of the sector, efforts will be made to progressively bring aviation turbine fuel under the GST framework, alongside incentivising states to rationalise VAT on ATF.
• Atmanirbhar aviation ecosystem: GIFT City will be strengthened as a global hub for aircraft leasing and financing, while domestic capabilities in maintenance, repair and overhaul, and aerospace manufacturing will be scaled up to build a self-reliant aviation sector.
• Global connectivity and leadership: India will modernise bilateral air service agreements and develop its airports as globally competitive transit hubs, reinforcing the country’s position in the international aviation landscape.
• Green and sustainable aviation growth: Sustainability will be mainstreamed in aviation development through promotion of sustainable aviation fuels, development of carbon-neutral airports, and adoption of energy-efficient and environmentally responsible technologies.
• Skilled human capital and strong safety framework: Capacity will be expanded in aviation training and skill development, alongside strengthening the Directorate General of Civil Aviation’s (DGCA) regulatory and safety oversight in line with global best practices.
• Digital and passenger-centric aviation: A seamless digital air travel ecosystem will be created through the expansion of DigiYatra, deployment of AI-enabled air traffic management systems, and transition to end-to-end paperless processes.

This budget presents an opportunity to transform the maritime sector by focusing on three key areas:

• Capital allocation for Maritime Amrit Kaal Vision

Align investments to support the long-term Maritime Amrit Kaal Vision by scaling up the Sagarmala Programme. Develop trunk infrastructure in ports, establishing alternate fuel hubs, and promoting port-led industries to attract private participation. Additionally, prioritise next-generation initiatives such as greening, smart port technologies, and broader coastal community development.

• Advancing Atmanirbhar Bharat

Drive self-reliance through an outcome-oriented programme for container manufacturing, supported by incentives linked to large-scale capacity creation. Establish an indigenous container shipping line to strengthen India’s global trade competitiveness.

• Trade facilitation and digitisation

Implement measures to enable EXIM growth and enhance digitisation, including improvements in port processes and expansion of the Maritime Single Window for seamless documentation and compliance.

• Budgetary support level on investment in railway projects for around INR2.5 lakh crore shall be further enhanced.
• Increase efforts towards capital recycling of Indian Railway investments through various monetisation models like multi-operator regime, TOT of freight lines, InVIT/REIT, and listing of umbrella of projects housed under a platform company.
• Encourage investments by the private sector on viable projects like freight corridors, passenger, and freight terminals (INR20–25,000 crore should be generated from private investments).
• Focus on decongestion of major freight and passenger routes—high-density network with capacity augmentation.
• Increase utilisation of investments like Vande Bharat trains by upgrading tracks to match the semi-high speed potential.
• Investment in wagons and new technologies to increase speeds on DFC corridors (potential 100 km/h operating at around 50 km/h presently).
• ⁠Increase implementation capacity for safety and technology upgrades like Kavach 4.0, semi-high speed 160 km/h and above.
• Increase focus on availability of technical manpower, including crew for locomotives and maintenance capacity through technology upgrades.
• ⁠Incentives for railway component and rolling stocks manufacturing in India through schemes like PLI, export promotion, and EXIM support.
• Improvement in passenger experience in multi-modal integration: transport + ticketing.
• Development of new freight corridors and semi-high speed corridors through government funding and private sector investments aligned to project structure with balanced risk allocation.

India’s path towards technology sovereignty-building a resilient electronics and semiconductor manufacturing ecosystem Expectations from Union Budget

To support supply chain resilience and India’s participation in GVCs, the country is required to achieve readiness and maturity across critical supporting industries. A continued policy push towards electronic components and semiconductor manufacturing is critical to ensure supply chain ecosystem development, reducing lead times and improve reliability.

The incentive outlay for the MSME sector in India for electronic components remains limited. With MSMEs contributing approximately 25–35% of the industry, capital support along with continued access to advanced technology and skilled talent is critical to ensure the development of a robust component ecosystem moving forward. To sustain chip production in India, it is imperative to extend the focus from fabs towards development of critical input materials such as gases, chemicals, and substrates. Incentive support, infrastructure readiness. and promotion of long-term strategic partnerships will be essential to attract players who have the potential to supply domestically to Indian manufacturers, thereby enabling investors to save costs on logistics.

In line with the Government of India’s vision of building self-reliance in semiconductor manufacturing, in addition to critical utilities such as power supply and ultra-pure water supply, establishment of industry benchmarks across road infrastructure, cold-chain logistics for high-precision equipment, and transportation systems to handle high-purity gases is essential.

Incentives to raise R&D expenditure, IP development, and retention are required to increase technological advancement and industrial competitiveness, thereby enhancing industry–academia collaboration.

To support skilling and workforce development, a focused approach towards the development of a robust talent pipeline with establishment of dedicated training fabs, cleanroom simulation facilities, etc., is critical.

Incremental incentives for exporting electronics and semiconductor products, such as tax and duty rationalisation, export subsidies, access to low-cost capital, or other support mechanisms can cumulatively help boost exports for Indian electronics. With 46 applicants approved under the ECMS scheme, component manufacturing is expected to scale up. However, effective integration of tier-2 and tier-3 suppliers will be critical to ensure high domestic value addition. Incentives for exporting electronics and semiconductor products, such as duty drawbacks, export subsidies, or other support mechanisms and similarly for rationalisation of import duties on essential components, raw materials, and equipment to reduce costs can cumulatively help boost exports for Indian electronics.

Backward integration of finished goods manufacturers in consumer electronics should be encouraged by continuing and increasing benefits–such as Production Linked Incentive (PLI) for white goods—that focus on manufacturing of compressors, copper tubes, and assembling of controller units. It would create value chain localisation and in-house design capabilities, thereby harnessing additional savings through efficiency gains and encouraging Indian manufacturers to overcome the learning curve.

Technology clients expect Budget 2026 to reinforce India’s positioning as a global hub for AI-led services, product engineering, digital exports, and tech manufacturing—shifting from just digitisation to productivity, competitiveness, and value creation.

• AI enablement: Compute access, cloud, and resources (energy, water, utility infrastructure)
  Clients expect more emphasis on AI enablers (compute access, AI-as-a-service marketplaces, and support for scalable AI adoption). AI growth in India is constrained by a lack of data centres and utility resources, so any budget allocations that ease infrastructural bottlenecks will allow organisations to fill this gap.

• GCCs as strategic tech engines instead of back offices
  For Global Capability Centre (GCC)-heavy clients, the expectation is policy signaling that India is the destination for high-end engineering, R&D, and AI work, not just cost arbitrage—an evolution of GCCs into strategic capability hubs. While GCCs are expanding in number and scale, there is significant friction around compliance policies (state-level variations in policies and regulations) and access to talent (while engineering talent is abundant, product ownership and super specialised skillsets such as AI engineering are still concentrated in limited pockets). These aspects slow the transition from support roles to greater strategic ownership. The technology sector will benefit from a policy that reinforces India’s intent to move GCCs up the value chain through clarity and execution support.

• Manufacturing and PLI: Continuity and ease of execution
  Technology manufacturing clients expect continuity and predictability in Production Linked Incentive (PLI) schemes, particularly electronics manufacturing, semiconductors, and hardware-led technology value chains. Key pain points include lack of clarity in eligibility, delay in approvals, and slow disbursements of incentives. Budget signals that improve ease of access to the scheme, faster disbursal, and long-term visibility of PLI frameworks would support sustained manufacturing investments.

• Policy and compliance clarity, including responsible AI
  Technology clients are looking for clear interpretation and consistent execution of policy that impacts technology operations. This includes clarity around cloud compliance, responsible AI usage, cross-border delivery models, and data protection. Clients expect clear and practical guidance on responsible AI, focused on how AI systems can be deployed safely and at scale by providing guardrails that offer clarity on data usage, accountability, and risk management that is aligned with emerging global norms. Such clarity helps enterprises deploy AI with confidence while continuing to innovate.

• Enterprise adoption: AI-led modernisation
  Enterprise tech firms expect the budget to continue supporting AI-led modernisation of enterprise tech systems—such as leveraging AI to drive automation of operations, better information and cybersecurity, and adoption of digital platforms. The expectation is of policy continuity and ecosystem support that encourage enterprises to move AI into scaled deployments. This will drive higher demand for technology services, expanded GCC mandates, and deeper technology capabilities, which together will reinforce India’s broader AI capacity-building agenda.

• Export competitiveness: Technology manufacturing
  Technology clients in hardware-linked segments would benefit from policies that continue improving export competitiveness through stable tariff regimes, export facilitation, and alignment with global supply chains. Reducing uncertainty around duties and improving export infrastructure would strengthen India’s position as a reliable technology manufacturing and export base.

In a nutshell

Technology clients will look to the budget to send an execution-oriented signal that India is scaling from a services powerhouse to a value-creation hub—supported by infrastructure readiness, manufacturing continuity, and policy clarity.