How Union Budget 2026 puts three kartavyas at the centre of Indias economic strategy

At a time when global trade is fragmenting and supply chains are being re-drawn, India’s Union Budget 2026-27 attempts to answer a simple but difficult question: how does a large, fast-growing economy protect itself from external shocks without turning inward. Presenting the Budget in Parliament, Finance Minister Nirmala Sitharaman acknowledged the challenges upfront. “Today, we face an external environment in which trade and multilateralism are imperilled and access to resources and supply chains are disrupted,” she said. The statement set the tone for a Budget that is less about short-term stimulus and more about long-term positioning.

Rather than headline tax giveaways or sharp fiscal pivots, Budget 2026 leans on continuity, capacity-building and institutional reform. At its core is a framework of three “kartavyas” that the government says will guide economic policy in the years ahead.

The three Kartavyas shaping Budget 2026

The Finance Minister structured the Budget around three duties: accelerating and sustaining economic growth, fulfilling aspirations by building capacity, and ensuring inclusive and broad-based development. These kartavyas are not merely intended to be rhetorical but expected to form the organising logic for proposals spanning manufacturing, employment, infrastructure spending and tax administration. Together, they reflect an attempt to align fiscal policy with India’s longer-term ambition of becoming a developed economy, while navigating a volatile global backdrop.

Growth, but without stepping away from global markets

The first kartavya, sustaining growth, is anchored in manufacturing and productivity. The Budget places particular emphasis on sectors that have become strategically important in recent years, including semiconductors, electronics, capital goods and critical minerals. Initiatives such as India Semiconductor Mission 2.0, the expansion of electronics manufacturing incentives, and the creation of Rare Earth Corridors are intended to reduce India’s reliance on imports for key inputs. These measures come after repeated global disruptions exposed the risks of concentrated supply chains.

Yet the Budget is careful to avoid framing self-reliance as isolation. Sitharaman made it clear that India’s strategy depends on remaining outward-looking. “India must remain deeply integrated with global markets, exporting more and attracting stable long-term investment,” she said.

Ganesh Kumar, Managing Partner, GLS Corporate Advisors LLP, said the Budget reflects a conscious recalibration of India’s industrial strategy rather than a narrow self-reliance push. “The emphasis is not just on capacity creation but on where India wants to sit in the global production stack. By focusing on equipment, materials and downstream manufacturing, the Budget addresses vulnerabilities that became visible only after recent supply chain shocks.”

Building capacity in an age of automation

The second kartavya addresses a concern that is increasingly global: the future of work. As artificial intelligence and automation reshape labour markets, Budget 2026 places capacity-building and employability at the centre of its social and economic agenda. A key proposal is the creation of a High-Level Education-to-Employment and Enterprise Standing Committee. The committee will identify high-growth services sectors, study skill gaps, assess services export potential, and examine how emerging technologies such as AI are altering job profiles.

Beyond institutional review, the Budget also signals an expansion of upskilling and reskilling efforts, particularly for engineers, technology professionals and service-sector workers. The goal is to move away from fragmented skilling schemes and towards a more integrated education-employment pipeline.

“This is an attempt to deal with employability structurally rather than episodically,” said Bhavik Thanawala, Partner, GLS Corporate Advisors LLP. “By factoring in AI and services exports, the Budget recognises how quickly job markets are changing.”

Inclusion, regions and cooperative federalism

The third kartavya focuses on inclusion, both social and regional. Budget 2026 continues targeted interventions for healthcare, mental health institutions, assistive devices for Divyangjans and region-specific development. Programmes such as Purvodaya for eastern India and enhanced support for the North-East aim to address uneven development across states. At the same time, the Budget reinforces cooperative federalism by retaining the states’ share of tax devolution at 41 percent.

For FY 2026-27, Finance Commission grants amounting to Rs. 1.4 lakh crore have been earmarked for rural and urban local bodies and disaster management, underlining the Centre’s reliance on states as partners in service delivery.

Trust-based tax reform and fiscal discipline

Running beneath all three kartavyas is a continued emphasis on fiscal discipline and trust-based tax administration. The fiscal deficit for FY 2026-27 is estimated at 4.3 percent of GDP, keeping the government on its consolidation path while sustaining high capital expenditure. On the tax side, the Budget introduces measures aimed at reducing litigation and compliance friction. Interest on compensation awarded by Motor Accident Claims Tribunals has been exempted from tax, and TDS on such interest removed. Assessment and penalty proceedings are proposed to be integrated, technical defaults decriminalised, and prosecution provisions rationalised.

Explaining the rationale, Sitharaman noted that honest taxpayers are often discouraged from settling disputes due to the stigma attached to penalties. “They will now be able to close cases by paying an additional amount in lieu of penalty,” she said. “These changes directly target the reasons disputes drag on for years but the outcome will depend on how uniformly the approach is applied on the ground,” said Amit Parkar, Partner, GLS Corporate Advisors LLP.

A Budget focused more on direction than disruption

Union Budget 2026-27 does not attempt dramatic resets. Instead, it builds incrementally on reforms announced over the past few years, including the transition to the new Income Tax Act from April 1, 2026. By emphasising stability, capacity-building and inclusion, the Budget signals that the government’s focus has shifted from rapid policy churn to steady execution. In an increasingly uncertain global environment, that predictability may be its most deliberate feature.

As the Finance Minister concluded her address, the emphasis remained firmly on continuity rather than disruption. The Budget, she indicated, is designed to navigate near-term uncertainty while keeping sight of India’s longer-term development goals. “India will continue to take confident steps towards Viksit Bharat, balancing ambition with inclusion,” Sitharaman said. 

With that framing, Union Budget 2026-27 positions itself as a statement of direction, anchoring growth, capacity-building and inclusion within a stable and reform-oriented fiscal framework.