The Union Budget 2026-27, presented on February 2, 2026, has strategically accommodated several demands from the United States raised during ongoing trade negotiations. While a comprehensive trade deal remains elusive, the budget incorporates measures aimed at increasing support for domestic sectors vulnerable to potential US tariffs, such as textiles, footwear, and marine products. This move is designed to prepare these industries for diversification in the face of potential trade actions, including tariffs as high as 50%.
Finance Minister Nirmala Sitharaman announced a tax holiday until 2047 for foreign companies providing cloud services to global customers using data centers in India. This initiative directly benefits major American companies seeking to expand their presence in the Indian market. The budget also proposes eliminating duties on aircraft components and nuclear generation equipment, sectors where the US holds a leading global market position and is a major exporter.
To bolster the domestic sector, particularly textiles, the budget includes measures to enhance productivity. These include capital support for textile machinery in clusters and a targeted scheme to improve the availability of input items, addressing a long-standing challenge for the industry.
As part of the ongoing bilateral trade agreement negotiations, the US had sought greater market access for its companies looking to establish data centers in India. These demands encompassed tax breaks, affordable access to resources like land, energy, and water, and duty exemptions on certain imports. The announcement of a tax holiday until 2047 for foreign companies establishing data centers directly addresses one of the US's primary requests.
The budget outlines significant financial figures for the fiscal year 2026-27. Non-debt receipts are estimated at ₹36.5 lakh crore, while total expenditure is projected at ₹53.5 lakh crore. The government's net tax receipts are estimated at ₹28.7 lakh crore. To finance the fiscal deficit, net market borrowings from dated securities are estimated at ₹11.7 lakh crore, with the balance expected to come from small savings and other sources. Gross market borrowings are projected at ₹17.2 lakh crore. The government is estimated to spend ₹53,47,315 crore in 2026-27, which is a 7.7% increase from the revised estimate of 2025-26.
The budget aims to reduce the revenue deficit to 1.5% of GDP, similar to the revised estimate for 2025-26. The fiscal deficit is targeted at 4.3% of GDP in 2026-27, a decrease from the revised estimate of 4.4% of GDP in 2025-26. The central government's long-term goal is to reduce its outstanding liabilities to around 50% of GDP by March 2031.
The budget reflects the government's commitment to balancing trade relations with the US while supporting domestic industries. While a comprehensive trade agreement with the US remains a work in progress, the measures outlined in the budget signal a proactive approach to addressing US concerns and fostering a more balanced economic relationship.