UNION BUDGET 2026-27/IMPORTANT TERMS FOR UPSC PRE & MAINS

OVERALL BUDGET PHILOSOPHY (MAINS READY INTRO)

Theme:

• Fiscal discipline + High public investment + Structural reforms
• Continuity with reform momentum + focus on Viksit Bharat @2047

Key Macro Signals:

• Growth rate ~ 7% (India fastest-growing major economy).
• Fiscal deficit on glide path.
• Emphasis on “crowding-in” private investment.
• Shift from welfare-only to productive capital expenditure.

TAX REFORMS & EASE OF DOING BUSINESS (GS III + ESSAY):

Income Tax Act, 2025

• Replaces Income Tax Act, 1961 from 1 April 2026.
• Sections reduced: ~800 → ~500.
• Objective: Certainty, simplicity, litigation reduction.
• Why it matters (Mains value):

• • Reduces “tax terrorism.”
  • Improves Ease of Doing Business.
  • Enhances voluntary compliance.

Individual Taxpayer Relief (Pre + Mains)

• MACT compensation interest → Fully tax exempt.
• LRS TCS reduced to 2% for education, medical, tours.
• Automated lower/nil TDS for small taxpayers.
• Revised return filing extended till 31 March.

 

 

FISCAL CONSOLIDATION & DEBT PATH (VERY IMPORTANT)

Deficit & Debt Targets::

Indicator	Value
Fiscal Deficit (BE 2026-27)	4.3% of GDP
Debt-GDP	55.6%
Target Debt-GDP	50±1% by 2030-31

UPSC Angle:

• Counter-cyclical fiscal policy.
• Long-term macroeconomic stability.
• Lower interest burden → more social & infra spending.

PUBLIC CAPEX & INFRASTRUCTURE PUSH (GS III CORE)

Capital Expenditure:

• Rs 12.2 lakh crore public capex (FY 2026-27).
• Focus: Roads, railways, ports, logistics, cities.

New Instruments:

• Infrastructure Risk Guarantee Fund → de-risking private investment.
• City Economic Regions (CERs) for Tier II/III cities.

Logistics Expansion:

• New Freight Corridors.
• 20 new National Waterways.
• Coastal cargo share target: 12% by 2047.
• Inland waterways + ship repair hubs.

MANUFACTURING & INDUSTRIAL POLICY (Make in India 2.0):

7+ Strategic Manufacturing Sectors:

1. Semiconductors (ISM 2.0): Equipment + Indian IP.
2. Biopharma SHAKTI: Biologics, biosimilars.
3. Electronics components: Rs 40,000 cr.
4. Rare Earth Corridors: Strategic minerals.
5. Chemical Parks: Cluster-based.
6. Capital Goods: Container manufacturing, CIE scheme.
7. Textiles: National Fibre Scheme, Mega Textile Parks.
8. Khadi & Sports Goods: Gram Swaraj + global branding.

Mains Linkages:

• Import substitution.
• Export competitiveness.
• Employment-intensive manufacturing.

MSMEs & LEGACY CLUSTERS (PRE + MAINS)

• Revival of 200 legacy clusters.
• SME Growth Fund: Rs 10,000 cr.
• TReDS mandatory for CPSE-MSME payments.
• Corporate Mitras: Compliance handholding.

Impact:

• Formalisation.
• Credit access.
• Productivity enhancement.

GREEN TRANSITION & ENERGY SECURITY :

Panchamrit in Action:

• Green Hydrogen Mission.
• Small Modular Reactors (SMRs) funding.
• CCUS (Carbon Capture, Utilization, and Storage): Rs 20,000 cr for steel, cement, power.

Why UPSC loves this:

• Net Zero 2070.
• Climate finance + energy transition.
• Balancing growth & sustainability.

FINANCIAL SECTOR & CAPITAL MARKETS

• Banking reforms committee for Viksit Bharat.
• Corporate bond market market-making framework.
• Municipal bonds incentive.
• MAT reduced to 14%, becomes final tax.
• Buyback tax rationalised.
• Prelims keywords: MAT, STT, Safe Harbour, Municipal Bonds.

 SOCIAL SECTOR: EDUCATION, HEALTH & TOURISM

Education & Skills:

• Education → Employment linkage.
• AVGC labs in schools & colleges.
• Girls’ STEM hostels (1 per district).

Health:

• Allied Health Professionals (100,000).
• Geriatric caregivers.
• Medical tourism hubs.
• NIMHANS-2 (mental health).

Tourism:

• National Digital Knowledge Grid.
• Adventure + heritage tourism circuits.
• Experiential archaeology.

AGRICULTURE & INCLUSION (GS III)

• High-value crops focus.
• Fisheries & reservoirs.
• AI-based Bharat-VISTAAR advisory.
• Women: SHE-Marts.
• Divyangjan: Skill & assistive devices.
• Purvodaya focus: East India development.

PRELIMS-ORIENTED ONE-LINERS

• Fiscal deficit BE 2026-27: 4.3%.
• Public capex: Rs12.2 lakh crore.
• Income Tax Act, 2025 effective: 1 April 2026.
• CCUS outlay: Rs 20,000 crore.
• Debt-GDP target: 50±1% by 2030-31.
• Courier export value cap: Removed.
• MAT reduced to: 14%.

 

MAINS ANSWER VALUE ADD (USE THESE PHRASES)

• “Crowding-in effect of public capex”
• “Transition from consumption-led to investment-led growth”
• “Fiscal prudence with developmental orientation”
• “Structural transformation of Indian economy”
• “Green growth pathway aligned with Panchamrit”

UPSC/PCS –PRE & MAINS

IMPORTANT TERMS :

Resident Individuals Outside India (PROI) – Investment Reform:

Context: Liberalization of the Portfolio Investment Scheme (PIS) to deepen capital markets.

Definition: PROI includes Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).

The Reform: * Individual Limit: Increased from 5% to 10% of the paid-up equity capital of a listed Indian company.Aggregate Limit: The total investment by all PROIs in a single company increased from 10% to 24%.

• Significance: Encourages stable, long-term capital inflows from the Indian diaspora and improves price discovery in the stock market.

 

Bharat-VISTAAR (Virtually Integrated System to Access Agricultural Resources):

Context: A flagship AI-driven digital public infrastructure for “Precision Farming.”

Mechanism: A multilingual AI tool that integrates AgriStack (digital farmer records) with ICAR’s (Indian Council of Agricultural Research) scientific “package of practices.”

Key Features:

Customized Advisory: Soil health-based crop selection, real-time weather alerts, and pest management.

Last-Mile Connectivity: Available in Hindi, English, and regional languages to bridge the information gap.Risk Reduction: Helps farmers mitigate climate-related risks through predictive analytics.

Liberalized Remittance Scheme (LRS) & TCS Rationalization:

Context: Easing the liquidity burden on middle-class families for global mobility.

• LRS Overview: Allows residents to remit up to USD 250,000 per year for travel, education, medical, or investment.

• Budget 2026 Change: * Overseas Tours: TCS slashed from a complex 5%/20% structure to a flat 2% (with no threshold).

• Education & Medical: TCS reduced from 5% to 2% for remittances exceeding Rs 10 lakh.

• Mains Value: This moves away from using high TCS as a “tax tracking” tool toward “Ease of Living,” preventing the locking up of family capital for months.

Biopharma SHAKTI:

Context: Strategy to transform India from a “Generics Hub” to a “Global Biopharma Manufacturing Hub.”

• Outlay:Rs 10,000 crore over 5 years.

• Components:

• NIPER Expansion: 3 new National Institutes of Pharmaceutical Education and Research and 7 upgrades.

Clinical Trials: A network of 1,000+ accredited sites to facilitate domestic biologics and biosimilars.

• Regulator Strengthening: Specialized scientific review cadre for CDSCO to meet global approval timelines.

Industrial & Chemical Clusters (Strategic Geography):

A. Rare Earth Corridors:

• States: Odisha, Kerala, Andhra Pradesh, and Tamil Nadu (coastal states with monazite/beach sand minerals).
• Objective: Break the Chinese monopoly on critical minerals used in EVs, defense, and green energy.

• Model: Integrated hubs for Mining → Processing → Research → Manufacturing (specifically Rare Earth Permanent Magnets).

B. Chemical Parks:

• Mechanism: Established via the “Challenge Route” (States compete based on ease of doing business).
• Plug-and-Play Model: Ready-to-use infrastructure (effluent plants, logistics) to reduce “Time to Market” and import dependency.

City Economic Regions (CER):

Context: Evolution from “Smart Cities” to “Economic Engines.”

• Focus: Tier-II and Tier-III cities with populations >5 lakh.

• Funding: Rs 5,000 crore per CER over 5 years.

• Strategy: Mapping cities based on their specific growth drivers (e.g., Temple towns for tourism, cluster towns for manufacturing) and using reform-cum-results-based financing.Tourism: Trails & Digital Infrastructure:

A. National Destination Digital Knowledge Grid:

• A unified digital repository to document cultural, spiritual, and historic
• Utility: Improves discoverability for tourists and provides data for evidence-based planning for local bodies.B. Specialized Trails (Experiential Tourism):

• Mountain Trails: In HP, Uttarakhand, and J&K.
• Turtle Trails: Coastal Odisha, Karnataka, and Kerala (focusing on nesting sites like Gahirmatha).

• Bird-Watching Trails: Pulicat Lake (Andhra/Tamil Nadu) and other wetlands.Infrastructure & Logistics:

A. Infrastructure Risk Guarantee Fund:

• Objective: To provide partial credit guarantees to lenders.
• Impact: De-risks the “construction phase” for private developers, encouraging private banks to lend more freely to long-gestation infra projects.B. New Dedicated Freight Corridors (DFC)

• Route: Dankuni (West Bengal) to Surat (Gujarat).
• Connectivity: Connects 6 states; links the Eastern DFC to the Western DFC.

• Significance: Enables high-speed, high-axle-load cargo movement from eastern mineral belts to western ports.