Sector Wise Budget Allocation 2026: Defence, Health, Energy
Last Updated: 02 February, 2026
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Presenting a detailed breakdown of the sector wise of the Union Budget 2026-2027, announced by Finance Minister Nirmala Sitharaman on 1 February 2026. This marks her record ninth consecutive budget presentation and is the first budget prepared in the newly renamed Kartavya Bhawan. Guided by a sense of 'Kartavya' (Duty), this budget serves as a unique Yuva Shakti-driven budget, heavily influenced by innovative ideas from the Viksit Bharat Young Leaders Dialogue 2026.
The Government's ‘Sankalp’ remains focused on the poor, underprivileged, and disadvantaged, working towards the vision of Sabka Sath, Sabka Vikas. The key highlights include strategic interventions in manufacturing, energy security, and the empowerment of the services sector. Here, we explore the budget allocation 2026 sector-wise.
Sector-Wise Budget Allocation 2026
Defence Sector Allocations
Defence budget 2026 is focused on boosting the security of the country while maintaining a strong thrust on modernization and self-reliance. It includes:
Total Defence Allocation: The Union Budget allocates approximately Rs 7.85 lakh crore (Rs 7,84,678 crore) for the Ministry of Defence in FY 2026-27.
Modernization of Military: Out of the total allocation, approximately Rs 2.19 lakh crore is designated for capital outlay on defence services, including aircraft, aero engines, and naval fleets.
Revenue Expenditure and Pensions: The allocation includes a revenue expenditure of Rs 3.65 lakh crore and a pension outlay of Rs 1.71 lakh crore for retired personnel, including One Rank One Pension (OROP) payments.
Defence Aviation Support: To boost domestic maintenance, the budget proposes to exempt basic customs duty on raw materials imported for manufacturing aircraft parts used in MRO requirements for defence units.
Agriculture Sector Allocations
Agriculture holds a prominent place in this year’s budget, with primary reforms aimed at increasing farmer income through productivity and technology:
Bharat-VISTAAR: A new multilingual AI tool that integrates AgriStack portals with ICAR agricultural practices to provide customized advisory support and reduce risks for farmers.
Coconut Promotion Scheme: A dedicated mission to increase production and enhance productivity by replacing old and non-productive trees with new high-yielding varieties.
Indian Cashew and Cocoa Programmes: A dedicated programme is proposed to make India self-reliant in production and processing, transforming these into premium global brands by 2030.
PM-Kisan: The scheme continues with a significant allocation of Rs 63,500 crore to supplement the financial needs of land-holding farmers.
Fisheries and Animal Husbandry: Support for entrepreneurship through credit-linked subsidies and the development of 500 reservoirs and Amrit Sarovars to strengthen the fisheries value chain.
High-Value Agriculture: Focused support for sandalwood cultivation and high-density orchards for walnuts, almonds, and pine nuts to diversify farm outputs and engage youth.
Cooperative Support: Exemption from tax on dividend income received by notified national co-operative federations for a period of three years, provided it is further distributed to members.
Power Sector Allocations
To fuel the economy and ensure energy security, here are the key sector-wise power budget allocations:
PM Surya Ghar Muft Bijli Yojana: A massive push for solar energy with a program allocation of Rs 22,000 crore.
Green Energy Corridor: Budgetary support for the addition of 6,000 ckm of transmission infrastructure under the intra-state green energy corridor project.
Nuclear Power Mission: Extension of basic customs duty exemptions on imports for specified Nuclear Power Projects until 2035, expanded to include all nuclear plants regardless of capacity.
Carbon Capture Utilization and Storage (CCUS): An outlay of Rs 20,000 crore is proposed over the next 5 years to adopt CCUS technologies across five major industrial sectors, including power and steel.
Airway and Railway Sector Allocations
Improving transport infrastructure is essential for growth. Key points for the airway and railway budget 2026:
Regional Connectivity (UDAN): Rs 550 crore allocated to the regional connectivity scheme for the revival of underserved airstrips.
Aviation Manufacturing: Exemption of basic customs duty on components and parts required for the manufacture of civilian and training aircraft.
Seaplane indigenisation: Introduction of a Seaplane VGF Scheme to provide support for remote connectivity and tourism operations.
Capital Outlay: The railway sector receives a record capital outlay of Rs 2.77 lakh crore for infrastructure, safety, and rolling stock.
High-Speed Rail Corridors: Development of seven corridors as ‘growth connectors’, including Mumbai-Pune, Delhi-Varanasi, and Hyderabad-Bengaluru.
Dedicated Freight Corridors: Establishment of new corridors connecting Dankuni in the East to Surat in the West to promote sustainable cargo movement.
Finance Sector Allocations
The Union Budget 2026-27 highlights a robust and resilient financial sector to mobilize savings and allocate capital efficiently:
High-Level Committee on Banking: A Committee on Banking will be established to align the sector with India’s next growth phase while ensuring financial stability.
Restructuring Public Sector NBFCs: Public sector NBFCs like PFC and REC will be restructured to achieve greater scale and efficiency.
Review of FEMA Rules: A comprehensive review of FEMA rules is proposed to create a contemporary, user-friendly framework for foreign investment.
High-Level Committee on Banking: A "High Level Committee on Banking for Viksit Bharat" will be established to review the sector and align it with India's next growth phase while safeguarding consumer protection and financial stability.
Corporate Bond Indices: A market-making framework for corporate bond indices and total return swaps will be introduced to deepen the corporate bond market.
Municipal Bonds: To encourage urban financing, an incentive of Rs 100 crore is offered for a single bond issuance exceeding Rs 1000 crore by large cities.
Electronics Manufacturing Sector Allocations
Electronics manufacturing is a major pillar of the 'Make in India' and 'Digital India' programs, with a strategic goal to achieve net-zero imports.
Electronics Components Manufacturing Scheme: The Electronics Components Manufacturing Scheme outlay is increased to Rs 40,000 crore to build a robust domestic ecosystem.
India Semiconductor Mission (ISM) 2.0: India Semiconductor Mission 2.0 is launched to produce equipment, design Indian IP, and strengthen global supply chains.
Production Linked Incentive (PLI) Schemes: The budget continues to support manufacturing through targeted PLI schemes:
Large-Scale Electronics: Focused on mobile phones and specified components with an allocation of Rs 1,345.04 crore.
IT Hardware: Covers laptops, tablets, and servers with a Rs 182 crore allocation.
Semiconductor and Display Manufacturing: A comprehensive program with an overall outlay of Rs 76,000 crore is approved to position India as a global hub for the ESDM sector.
Safe Harbour for Component Warehousing: A safe harbour is provided to non-residents for component warehousing in bonded warehouses at a 2% profit margin to enhance logistics efficiency.
Microwave Oven Manufacturing Support: An exemption from basic customs duty is provided for specified parts used in the manufacture of microwave ovens to deepen domestic value addition.
MSME Allocations
The budget focuses on supporting and building MSMEs as a vital engine of growth for a prosperous and resilient rural Bharat:
SME Growth Fund: A dedicated Rs 10,000 crore fund is proposed to create future 'Champions' in the MSME sector.
Self-Reliant India Fund: The fund set up in 2021 is being topped up with Rs 2,000 crore to ensure micro-enterprises maintain continuous access to risk capital.
Liquidity Support through TReDS: TReDS is mandated as the settlement platform for all MSME purchases by CPSEs, with new credit guarantee mechanisms and links to GeM to ensure cheaper and quicker financing.
Professional Support via ‘Corporate Mitras’: Professional institutions will design modular courses to develop a cadre of accredited para-professionals to help MSMEs meet compliance requirements at affordable costs.
PM Vishwakarma: Continued support for the Guru-Shishya parampara with an allocation of Rs 3,861 crore to improve the quality and reach of products made by artisans and craftspeople.
Raising and Accelerating MSME Performance (RAMP): An allocation of Rs 1,500 crore is provided for this World Bank-supported scheme to improve MSME access to markets, finance, and technology upgradation.
Export Promotion Mission: A flagship initiative to strengthen export competitiveness for MSMEs and labor-intensive sectors by consolidating schemes like Interest Equalisation.
Healthcare and Medicine Sector Allocations
Good health is a core pillar for a youthful India. Key allocations for healthcare include:
Biopharma SHAKTI: A new strategy for healthcare advancement with an outlay of Rs 10,000 crore over the next 5 years to build a domestic ecosystem for biologics.
Regional Medical Hubs: Support for states to establish five integrated healthcare complexes in partnership with the private sector to promote medical value tourism.
Allied Health Professionals (AHPs): Upgrade of existing and establishment of new AHP institutions to add 1,00,000 professionals over 5 years across 10 disciplines like radiology and behavioral health.
Care Ecosystem: Development of NSQF-aligned programmes to train 1.5 lakh multiskilled caregivers for geriatric and allied care services.
Mental Health and Trauma Care: Setting up NIMHANS-2 in North India and establishing Emergency and Trauma Care Centres in District Hospitals to increase capacities by 50%.
Education Sector Allocations
Education and skilling are prioritized to build people's capacity for a global services market:
Atal Tinkering Labs (ATL): Significant allocation of Rs 3,200 crore to foster creativity and innovation among school students.
University Townships: Support for states to create 5 university townships near major industrial and logistic corridors to improve industry-academia synergy.
STEM Girls' Hostels: Provision for establishing one girls' hostel in every district to support students in higher education STEM institutions.
New National Institute of Design: Establishment of a new NID in the eastern region of India through a challenge route.
Telescope Infrastructure: Setting up or upgrading four major telescope facilities to promote immersive experiences in astrophysics and astronomy.
Gaming and AVGC Sector Allocations
The budget recognizes the "Orange Economy" as a significant growth driver for the services sector. It includes:
Talent Development in AVGC: A dedicated allocation of Rs 250 crore for talent development in the Animation, Visual Effects, Gaming and Comics sector.
AVGC Content Creator Labs: Support for establishing 15,000 Content Creator Labs in schools and 500 in colleges in collaboration with the Indian Institute of Creative Technologies.
Livelihood for Divyangjan: The Divyangjan Kaushal Yojana will focus on task-oriented roles within the AVGC sector to provide dignified livelihood opportunities for persons with disabilities.
Tourism Sector Allocations
To position India as a global destination and document its cultural heritage, the following steps were taken:
Archaeological Site Development: Development of 15 archaeological sites, including Lothal, Sarnath, and Leh Palace, into vibrant experiential cultural destinations.
National Destination: Digital Knowledge Grid Establishment of a digital grid to document all places of cultural, spiritual, and heritage significance.
Eco-Tourism Trails: Development of ecologically sustainable mountain trails in the Himalayas, Turtle Trails in coastal states, and bird-watching trails at Pulikat Lake.
National Institute of Hospitality: Upgrading the existing National Council for Hotel Management into a bridge between academia and industry.
Guide Upskilling: A pilot scheme to train and upskill 10,000 guides at 20 iconic tourist sites through hybrid training with an IIM.
Infrastructure Sector Allocations
Record-breaking public investments form the foundation of this year's budget:
Record Public Capex: Total public capital expenditure increased to Rs 12.2 lakh crore for FY 2026-27.
Infrastructure Risk Guarantee Fund: A new fund designed to provide calibrated partial credit guarantees to lenders, strengthening private developer confidence.
City Economic Regions (CER): Mapping of CERs with an allocation of Rs 5,000 crore per region over 5 years to deliver the economic power of agglomerations.
Jal Jeevan Mission: The mission continues with an allocation of Rs 67,670 crore to provide household tap connections to every rural home.
Maritime and Waterways: Operationalization of 20 new National Waterways and a Coastal Cargo Promotion Scheme to shift cargo from road/rail to shipping.
Rare Earth Corridors & Customs Relief: Dedicated Rare Earth Corridors will be established in mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to promote domestic mining and research, supported by a reduction in basic customs duty on monazite from 2.5% to Nil.
Sports and Recreational Goods: A dedicated initiative for high-quality, affordable sports goods to promote research, innovation, and design.
Textile and Footwear Sector Allocations
The government is providing significant support to boost export competitiveness in these labour-intensive sectors:
Export Time Extension: The time period for exporting final products for leather and textile garment exporters has been extended from 6 months to 1 year.
Customs Duty Support: Extending duty-free imports of specified inputs to exporters of "Shoe Uppers" to match the benefits available for synthetic footwear.
Infrastructure Support: The Footwear, Leather and Accessories Development Programme (FLADP) continues with an allocation of Rs 300 crore.
Conclusion
The Union Budget 2026-2027 marks a decisive step toward the vision of Viksit Bharat by balancing ambitious growth with inclusive development for the poor, youth, farmers, and women. By committing a record Rs 12.2 lakh crore to public infrastructure and launching transformative missions like ISM 2.0 and Biopharma SHAKTI, the government is strengthening India's position as a global manufacturing and services hub.
Significant tax simplifications and sector-specific reliefs improve the ease of living while fostering a robust, resilient, and technology-driven financial ecosystem. Ultimately, this "Yuva Shakti-driven Budget" provides a strategic roadmap to accelerate economic productivity and fulfill the aspirations of every citizen through the spirit of 'Sabka Sath, Sabka Vikas'.
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