Union Budget 2026–27: Transport tops allocations, defence gets major push

New Delhi: Finance Minister Nirmala Sitharaman on Sunday presented the Union Budget 2026–27 on Sunday, announcing major allocations across railways, defence, agriculture, MSMEs, healthcare and infrastructure, alongside key changes in income tax provisions.

Prime Minister Narendra Modi described the Budget as "historic”, calling it a "highway of immense opportunities” that would accelerate India’s Reform Express and strengthen the foundation for a Viksit Bharat by 2047.

While the transport sector, including the Indian Railway and roadways, had the biggest share earmarked in the Budget, the defence spending got a major boost in this year's Budget.

In the Union Budget 2026–27, transport sector saw the highest allocation at Rs 5,98,520 crore, followed closely by defence at Rs 5,94,585 crore. Rural development has been allotted Rs 2,73,108 crore, while home affairs gets Rs 2,55,234 crore.

Agriculture and allied activities have been allocated Rs 1,62,671 crore and education Rs 1,39,289 crore. Energy spending stands at Rs 1,09,029 crore, with health receiving Rs 1,04,599 crore.

Urban development has been earmarked Rs 85,522 crore, IT and telecom Rs 74,560 crore, and commerce and industry Rs 70,296 crore.

Social welfare has been allocated Rs 62,362 crore, scientific departments Rs 55,756 crore and tax administration Rs 45,500 crore.

External affairs has received Rs 22,119 crore, finance Rs 20,649 crore, while development of the North East has been allotted Rs 6,812 crore.

Here is how allocations have been distributed in several sections of the major sectors.

The Budget has earmarked Rs 2,77,830 crore for capital expenditure for the Ministry of Railways in FY27, a 10.25 per cent increase over Rs 2,52,000 crore in 2025–26 and the highest ever allocation, PTI reported.

The funds will be used for new line construction, rolling stock procurement and infrastructure upgrades. In addition, Rs 15,000 crore will be mobilised through extra budgetary resources.

The government announced the creation of dedicated Rare Earth Corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu to promote mining, processing, research and manufacturing.

The move aims to strengthen domestic capacity in critical minerals and permanent magnet manufacturing, seen as essential for the modern manufacturing ecosystem.

Defence spending has been pegged at Rs 5,94,585 crore, with industry welcoming the nearly 22 per cent increase in capital expenditure. The decision to scrap basic customs duty on components used in aircraft manufacturing is expected to boost domestic production.

Defence firms said the allocation reflects India’s geo-strategic priorities, with companies such as Thales highlighting its role in modernising the armed forces.

The Ministry of Home Affairs has received Rs 2,55,234 crore, up 9.44 per cent from the previous year. Nearly 68 per cent of the allocation has gone to policing, covering central armed police forces, intelligence agencies, border development and policing in Delhi and Jammu and Kashmir, PTI reported.

Capital expenditure under the police head has risen sharply, signalling a renewed focus on modernisation and infrastructure. The ministry is headed by Amit Shah.

Agriculture and allied activities have been allocated Rs 1,62,671 crore, a 7.12 per cent increase from last year.

The Budget focuses on livestock, fisheries and high-value agriculture, aiming to diversify rural livelihoods and reduce dependence on traditional crop farming, with special emphasis on small and marginal farmers.

The Budget proposes dedicated freight corridors linking Dankuni to Surat, operationalisation of 20 new national waterways, and development of a ship repair ecosystem for inland transport.

A coastal cargo promotion scheme has also been announced to raise the share of inland and coastal shipping to 12 per cent by 2047.

Industry players, including Essar Ports, said the measures would strengthen India’s maritime and logistics backbone.

To support small businesses, the government announced a Rs 10,000 crore MSME Growth Fund to create "Champion MSMEs” and mandated the use of TReDS for CPSEs. Indian Overseas Bank said the measures would improve access to credit, enhance liquidity and support balanced industrial growth with job creation.

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Healthcare allocation has been raised by 10 per cent to Rs 1,06,530 crore. The Budget includes measures to strengthen mental health infrastructure, establish regional medical hubs, boost biopharma manufacturing, train caregivers and reduce the cost of cancer medicines. As part of the mental health push, the government announced NIMHANS 2.0 to expand access to specialised care.