Press Release
New Delhi | February 5, 2026:
A closer analysis of the Union Budget reveals that the public health spending by the Centre remains at a dismal 0.27% of GDP and the education spending stands at 0.35% of GDP, far below the 6% of GDP commitment under the much celebrated National Education Policy. Exposing the indifference to the agriculture sector, its share of the Union Budget declined from 2.71% in 2025-26 to 2.63% in 2026-27. While at a time by the government’s own admission over 80 crore people are still dependent on the public distribution system, the budgetary allocation for Pradhan Mantri Gareeb Kalyan Anna Yojana (PMGKAY) is only 0.63% of the total GDP. Within the Social Justice ministry’s economic development schemes, the allocation for Schedule Castes, Backward Castes and Safai karmchari corporation, is just a paltry Rs 1 lakh each.
Since the presentation of the Union Budget, Centre for Financial Accountability has combed through the speech and details that followed to put together our annual, comprehensive analysis of the Budget. The report analyses seven interconnected and key sectors: Social Sector, Social Protection, Energy, Climate, Infrastructure, NREGA, Taxation, and Banking and other Financial Institutions, to provide a robust understanding of the Budget and the potential economic, social and environmental implications of this Budget.
The 2026-27 Union Budget presented by Finance Minister Nirmala Sitharaman on February 1, 2026 shows a lackluster effort toward strengthening the public welfare sector while continuing to mollycoddle private corporations.
While hyping Indiaâs climate commitments on international platforms and offering the world with Panchamrit goals, at home the allocation to the Ministry of Coal has increased by 640%, signalling a strong policy push towards coal and lignite gasification despite its carbon-intensive nature. An outlay of Rs. 20,000 crore has been announced for Carbon Capture, Utilisation and Storage (CCUS), positioning it as a key enabler for continued fossil-fuel use rather than direct emissions reduction.
Key announcements in the Budget are to facilitate the âMother of all Tradesâ India-EU FTA announced a few days before the Budget and the tariff reduction by the US on Indian goods announced a day after the Budget. The expenditure in prohibitively expensive Carbon Capture Utilisation and Storage (CCUS) technologies is widely being seen dovetailing the India-EU FTA. While the FTA dramatically cuts tariffs across most goods, it does not exempt Indian exports from the EUâs Carbon Border Adjustment Mechanism (CBAM) â a carbon-linked levy that applies to emissions during the production of steel, aluminium, cement and other high-carbon products entering the EU market. The CCUS outlay in the budget is thus a subsidy to Indian exporters – absorbing carbon emissions leads to a reduction in CBAM linked tax thereby bringing down export costs. Similarly, the allocations for the MSME sector – especially fisheries, textiles and leather – is aimed at providing export ready materials to the EU. Having said that, at a time of heightened geopolitical uncertainty, addressing export losses without simultaneously building domestic capacity and boosting internal demand is inadequate. Exports, after all, contribute to only about 20% of our GDP while the bulk of it (more than 60% of GDP) accrues from domestic consumption. Thus, without a supportive internal market, MSMEs will continue to struggle.
Also, while it is good to support a few âchampionsâ geared towards export, it also marks a shift. Earlier Budgets mainly supported MSMEs through credit-guarantee schemes that encouraged bank lending, keeping support largely debt-based. The new âč10,000 crore SME Growth Fund shifts to equity for a few âfuture champions,â helping some scale up but doing little for the wider MSME sector still struggling with credit access and weak demand. It is particularly concerning to see MSMEs increased reliance on gold-backed loans (as underlined in the Economic Survey) given that for small enterprises business and household finances often have only a thin line separating them.
Pollution control allocations and CPCB funding have been reduced despite worsening air pollution and significant regulatory staff shortages, signalling weak enforcement capacity. Less than Rs. 52 crore is allocated to biodiversity and ecosystem conservation, compared to over Rs. 1.33 lakh crore for petroleum, refinery, and petrochemical sectors driving habitat destruction and emissions. Despite escalating cyclone and sea-level risks across Indiaâs 7,500 km coastline, coastal protection funding declines while the Deep Ocean Mission promotes seabed mining and mineral extraction. Large investments in CCUS, nuclear expansion, rare earth mining, and hydropower-linked infrastructure reinforce carbon-intensive development pathways while conservation, adaptation, and ecosystem restoration remain underfunded.
Interestingly, the Economic Survey argues that climate action diverts resources from social welfare, even though the Budget simultaneously prioritises infrastructure, defence, and industry over both welfare and climate resilience.
Extension of Basic Customs Duty (BCD) exemption on imports for nuclear power projects till 2035, expanded to cover all nuclear plants irrespective of capacity (removing the earlier capacity threshold of 440 MW or above), reinforcing long-term commitment to capital-intensive nuclear expansion. Liability for nuclear disasters are capped at an abysmally low Rs. 3,000 crore, while Fukushimaâs clean up and damage to GDP was in the hundreds of billions.
Rs. 1000 cr allocation for Infrastructure Risk Guarantee Fund to use public money to absorb risks that private investors are unwilling to bear, socialising potential losses while profits remain privatised. Not learning from the monumental failure in the Statue of Unity to Sabarmati Riverfront seaplane project, inaugurated by PM Modi in 2020 which ran only for 80 days despite investing Rs. 19 crores, the Budget announces giving incentives to manufacture seaplanes.
Seven High-Speed Rail corridors between cities as âgrowth connectorsâ were announced ignoring the needs of ordinary passengers who face overcrowding and poor amenities that persist in regular trains used by the majority, despite a whopping Rs. 2.81 lakh crore allocation for the Railways ministry.
The top 10% of earners capture 58% of income and 65% of wealth, while the bottom 50% get only 15%. While personal income tax is at 33.3% of the total tax collection, the corporate tax is only at 28%. Personal income tax grew from Rs. 4.2 lakh crore (2017-18) to Rs.14.7 lakh crore (FY25), increasing its share of total tax revenue from 21.9% to 33.3%, while corporate taxes remained around 26-28% of revenue. India relies more on consumption taxes like GST and less on a balanced mix, limiting the capacity to fund health, education, and climate goals. FY23-24 tax exemptions cost the government nearly Rs.99,000 crore, highlighting how households bear a heavier burden under GST. Tax demands locked in disputes climbed sharply-from Rs.6.64 trillion (2021-22) to Rs. 14.21 trillion (2023-24), and by the end of FY25, Rs. 38.4 trillion of assessed taxes remained unrealised, with 47% under dispute, limiting the governmentâs ability to spend on public needs.
The low Non Performing Assets and rising profits by the public sector banks claimed in the Economic Survey are underpinned by Rs. 6.15 lakh crore in write-offs in the last five years, squeezing credit for MSMEs and smaller borrowers. Key banking decisions shifted outside parliamentary debate by forming a High-Level Committee to decide mergers and disinvestment, bypassing scrutiny and threatening public control over banks.
