Union Budget 2026-27: Rationalised Subsidies to Strengthen Manufacturing, Agriculture & Energy |

Updated: February 08, 2026 11:32

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India’s Union Budget 2026–27 has unveiled a subsidy rationalisation plan aimed at improving fiscal discipline while enhancing profitability for core industries. By streamlining subsidies in sectors like manufacturing, agriculture, and infrastructure, the government hopes to reduce inefficiencies, strengthen margins, and create a more sustainable growth model for India’s industrial economy.

Key Highlights

Budget Announcement: Finance Minister Nirmala Sitharaman’s Union Budget 2026–27 introduced a subsidy rationalisation framework designed to cut wasteful expenditure and redirect funds toward productive investments.
Core Industry Impact: Sectors such as manufacturing, agriculture, energy, and infrastructure are expected to benefit from improved margins as subsidies are streamlined and better targeted.
Fiscal Discipline: The plan reflects the government’s push for fiscal credibility, balancing growth ambitions with responsible spending. Rationalisation is expected to reduce fiscal deficit pressures while ensuring subsidies reach intended beneficiaries.
Efficiency Gains: By eliminating overlapping schemes and tightening compliance, the government aims to reduce leakages and improve efficiency in subsidy distribution. This could free up capital for industries to reinvest in innovation and expansion.
Investor Sentiment: Analysts believe rationalisation will improve corporate earnings visibility, making Indian equities more attractive to domestic and foreign investors.
Agriculture & Rural Productivity: Technology-led agriculture initiatives paired with rationalised subsidies are expected to enhance rural productivity, ensuring farmers benefit directly while reducing systemic inefficiencies.
Global Context: With India positioning itself as the world’s third-largest economy, subsidy rationalisation is seen as a strategic move to align with global best practices and strengthen competitiveness.

Why It Matters

The subsidy rationalisation plan is not just about fiscal savings—it is a structural reform that could reshape India’s industrial landscape. By improving margins for core industries, the government is signaling a shift toward sustainable growth, where subsidies serve as enablers rather than distortions. For businesses, this means greater profitability and predictability. For citizens, it promises more efficient use of taxpayer money and better-targeted welfare.

Sources: PwC India Budget Analysis, Taxcrux Union Budget 2026 Review, Viproinfoline Business Impact Report

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