News

Union Budget 2026 and the next stage of India’s economic transformation

Ramesh Nair

The Union Budget 2026 underscores the government’s continued focus on long-term economic expansion, infrastructure creation, and capital market deepening. Rather than relying on short-term stimulus, the policy direction reinforces structural drivers that support investment, productivity, and urban transformation. This macro framework is significant not just for individual sectors and the broader ecosystem.

A record public capital expenditure outlay of ₹12.2 lakh crore serves as a central pillar of this strategy. Continued investments in transport networks, logistics corridors and urban infrastructure are expected to improve connectivity both within and between cities. Over time, this will support more balanced urbanisation, reduce pressure on core districts, and enable the emergence of new commercial and residential clusters supported by stronger civic infrastructure.

The push toward developing city economic regions further signals a shift towards more distributed growth. By encouraging economic activity beyond traditional central business districts, the policy framework promotes decentralisation and the rise of new business hubs in peripheral and secondary locations. This will help ease congestion in established urban cores and improve access to jobs by bringing workplaces closer to residential catchments. It is also encouraging to see the government leveraging REITs as a vehicle for accelerating economic growth across the country by monetising central government land, strengthening confidence in REITs, their revenue generation potential, and their ability to deliver stable returns.

At the same time, the Budget continues to strengthen India’s appeal as a global services and technology hub. The long-term tax holiday extending until 2047 for foreign cloud service providers leveraging Indian data centres sends a strong signal about India’s capability to attract long-duration global capital into digital infrastructure. This supports the broader digital ecosystem spanning technology parks, innovation hubs, and high-value employment clusters.

The emphasis on strategic sectors such as biopharma and semiconductors adds another layer to this structural transformation. By encouraging advanced manufacturing, research, and design-led industries, the government is laying the foundation for more innovation-driven growth. These sectors typically anchor high-skilled jobs, research facilities and specialised ecosystems

Capital market development is another important thread running through the Budget’s approach. Continued policy support for market-linked investment platforms and steps that facilitate broader participation from domestic and foreign investors contribute to deeper, more liquid financial markets. Over time, this improves capital allocation, enables asset monetisation, and supports the recycling of capital into new infrastructure and development projects.

Building on these structural reforms, a few targeted refinements could have further strengthened real estate and housing outcomes. The affordable housing definition has remained unchanged for years despite rising prices and unit costs, limiting the viability of new supply in urban markets; aligning it across schemes and regulators would improve supply and credit flow. Revisiting the home-loan interest deduction would also better support first-time buyers facing higher ticket sizes.

In commercial real estate, the continued absence of input tax credit on leasing raises occupier costs, while higher investment limits for insurers in REITs and greater pension fund participation could unlock additional long-term domestic capital for income-producing assets.

In contrast, measures aimed at improving execution capacity and reducing project-level risks strengthen the supply side of the growth equation. Initiatives such as the proposed Infrastructure Risk Guarantee Fund can enhance confidence in large-scale infrastructure delivery by reducing financing uncertainties. Similarly, schemes designed to enhance construction and infrastructure equipment capacity are expected to support faster, more efficient project execution. Together, these steps help ensure that announced investments translate into on-ground assets in a timely and cost-effective manner.

Viewed together, the Union Budget 2026 presents a coherent long-term framework built on infrastructure expansion, urban transformation, services-led growth, advanced manufacturing, and capital market deepening. By reinforcing these structural pillars, the government is shaping an environment that supports sustained economic momentum, wider geographic participation in growth, and greater integration of India’s cities into global value chains.

The author is Managing Director and CEO of Mindspace REIT

Source: The Hindu Businessline