In a year when four States and one Union Territory — Tamil Nadu, Kerala, Assam, West Bengal and Puducherry — are headed for Assembly elections, expectations around the Union Budget, at least in political circles, were that these States would receive some goodies.

While the Budget did include announcements touching these States, the measures were packaged within broader multi-State initiatives that reflected the Government’s attempt to balance domestic political expectations with global economic uncertainties. 

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This was, in fact, one of the first questions Union Finance Minister Nirmala Sitharaman was asked during her post-budget press conference — whether she had deliberately avoided poll-bound States after previous budgets that announced sops were criticised. “There is enough to cover all the election-bound States. Much has been announced for election and non-election States,” she said.

For West Bengal, the announcements include a proposed high-speed rail corridor between Siliguri and Varanasi, a Dankuni (East)-Surat (West) dedicated freight corridor, and an East-West Industrial Corridor. Tamil Nadu and Kerala feature in a Rare Earth Corridor along with Odisha and Andhra Pradesh, alongside incentives for farmers growing cashew, coconuts and Cocoa. The “Turtle Trails” project includes coastal areas of Odisha, Karnataka and Kerala. Assam is set to be a part of a Buddhist tourism circuit encompassing northeastern States like Tripura, Arunachal Pradesh, Sikkim, Manipur and Mizoram. The Lokpriya Gopinath Bordoloi Regional Institute of Mental Health in Tejpur, Assam, will also be upgraded.

By wrapping these measures in a multi-State spread, the government appeared to send the message that while concerns over domestic politics remain important, the global headwinds and the trade issues hanging fire were looming over it all.

The setting up of a National Institute of Hospitality for training in the service sector, encouraging women in STEM by setting up girls’ hostels in STEM institutions across districts, and several measures in the tax proposals to boost the manufacturing sector were the bigger announcements. A ₹40,000-crore push for Semiconductor Mission 2.0, and an electronics manufacturing boost were also announced.

All these measures, government sources said, are aimed at insulating India from global trade disruptions, strengthening supply chains, and preparing Indians for different skill set demands from countries with which India has concluded or is finalising Free Trade Agreements.

Many of these measures, however, are not immediately saleable in electoral terms and will require careful support from the government to bear fruit. The broader aim, government managers argue, is to craft a new narrative — of constructing a rail track in anticipation of a train running on it not today, but several years later — a horizon that may be far, but could affect the legacy of the Modi years (the period of governance under Prime Minister Narendra Modi).

The budget for rural employment schemes saw a 43% hike, with allocation of ₹95,692.31 crore to the new rural employment scheme under the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB–G RAM G) Act, 2025 and ₹30,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

Together, the allocation for both rural employment schemes stands at ₹1,25,692.31 crore, compared with the Revised Estimate of ₹88,000 crore for the MGNREGA in 2025-26. However according to activists, the allocation is not expected to meet the government’s own target of providing 125 workdays to all workers enrolled under the MGNREGS. Calculations show that to meet this commitment, the government would need to allocate ₹2.30 lakh crore.

The Union Budget has removed Basic Customs Duty on quite a range of products but also raised the duty on some. It also envisions simplification of the Customs procedures, moving into “Trust based systems” for ease of doing business.

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The basic customs duty on potassium hydroxide will go up to 7.5 % from nil, increasing input costs for industries such as chemicals, soaps, detergents, and batteries unless there is adequate domestic availability. The duty on umbrellas (other than garden umbrellas) has been revised from a flat 20% to 20% or ₹60 per piece, whichever is higher, in a move to curb low-priced imports.

Duties on umbrella parts, trimmings, and accessories will go up to 20% from 11%, or ₹25 per kg, whichever is higher, raising the cost for domestic assemblers using imported inputs.

All dutiable goods imported for personal use will see a reduction of duty from 20% to 10%. For chewing tobacco and Jarda-scented tobacco, the National Calamity Contingent Duty will be increased to 60% from 25% from May 1. However, effective duty rate on these products will remain unchanged.

The Global Trade Research Initiative report says that the Budget, though country-neutral, improves market access prospects for U.S. exporters across several high-value sectors.

The Finance Minister Nirmala Sitharaman has also proposed to increase the limit for duty-free import of specified inputs used for processing seafood products for export, from the current 1 % to 3 % of the FOB value of the previous year’s export turnover.

The Minister also said that duty-free imports will be allowed of specified inputs (which is currently available for exports of leather or synthetic footwear) for export of shoe uppers too. The time period for export of final product under the Advance Authorisation scheme has been extended to one year from six months for export of leather or textile garments, leather or synthetic footwear and other leather products.

For better use of capacities of manufacturing units in Special Economic Zones that are hit by global trade disruptions, there will be a one time measure of concessional duty to facilitate sales to sell in the Domestic Tariff Area limited to a prescribed proportion of their exports. Measures will be taken to ensure that the units in the domestic tariff area will not be affected.

Customs Integrated System and cargo clearance

For ease of doing business, approvals required for cargo clearance from various Government agencies will be seamlessly processed through a single and interconnected digital window by the end of the financial year. Processes involved in clearance of food, drugs, plant, animal and wild life products, accounting for around 70% of interdicted cargo, will be operationalised on this system by April this year.

The duty deferral period for tier-two and tier-three Authorised Economic Operators will be increased to 30 days and eligible manufacturer-importers will also get the duty deferral facility. The validity period of advance ruling, binding on Customs, will be increased from the present three years to five years.

Regular importers with trusted long-standing supply chains will be recognised in the risk system, so that the need for verification of their cargo can be minimised. Export cargo using electronic sealing will be provided through clearance from the factory to the ship.

For import of goods that do not require any compliance, filing of bill of entry by a trusted importer, and arrival of goods will automatically notify Customs for completing their clearance formalities. The Customs warehousing framework will be transformed into a warehouse operator-centric system with self-declarations, electronic tracking, and risk-based audit.

Customs Integrated System will be rolled out in two years as a single, integrated and scalable platform for all the customs processes.

To support aspirations of India’s small businesses, artisans and start-ups to access global markets through e-commerce, the current value cap of ₹10 lakh per consignment on courier exports will be removed. Handling of rejected and returned consignments will be improved with effective use of technology for identifying such consignments.

The labour-intensive textile and apparel sector and the Micro, Small and Medium-scale Enterprises (MSMEs) that were impacted by the geo political developments during the last couple of years got a boost from the Union Budget presented on Sunday (February 1, 2026) with new schemes and higher budgetary allocations.

The textile sector will see almost 25% jump in budgetary allocation for 2026-2027 from the current financial year and the MSME sector will see doubling of budgetary allocation.

Finance Minister Nirmala Sitharaman said Central public sector enterprises (CPSEs) would establish high technology tool rooms in two locations as digitally enabled automated service bureaus that locally design, test, and manufacture high-precision components at scale and at lower cost. A scheme for enhancement of construction and infrastructure equipment would be introduced to strengthen domestic manufacturing of high-value and technologically-advanced equipment and ₹10,000 crore would be allocated during the next five years for a scheme for container manufacturing.

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For the “labour-intensive textile sector”, the government had proposed comprehensive measures that would include a special programme to promote sports goods, a National Fibre Scheme for manmade fibres, silk, wool, etc; mega textile parks developed on challenge mode for value addition to technical textiles; a Textile Expansion and Employment Scheme to modernise traditional clusters with capital support for machinery, technology upgradation and common testing and certification centres. A National Handloom and Handicraft programme would ensure targeted support for weavers and artisans. The Mahatma Gandhi Gram Swaraj initiative would strengthen khadi, handloom and handicrafts, and the Tex-Eco Initiative would promote globally competitive and sustainable textiles and apparels, and Samarth 2.0 would upgrade the textile skilling ecosystem, the Finance Minister said.

Under rejuvenation of legacy industrial clusters, the budget had proposed a scheme to revive 200 legacy industrial clusters; create a dedicated ₹10,000-crore SME Growth Fund to create future champions and top up the Self-Reliant India Fund set up in 2021 with ₹2,000 crore to enable micro units access to risk capital.

Credit guarantee support

The TReDS would be a mandatory transaction settlement platform for all purchases from MSMEs by CPSEs, and a credit guarantee support mechanism would be introduced through CGTMSE for invoice discounting on TReDS platform; GeM would be linked with TReDS, and TReDS receivables would be introduced as asset-backed securities, helping develop a secondary market.

Ms. Sitharaman said the government would facilitate professional institutions such as ICAI, ICSI, ICMAI to design short-term, modular courses and practical tools to develop a cadre of ‘Corporate Mitras’, especially in tier-two and tier-three towns.

Indicating a freeze on India’s activities in the port of Chabahar, the Union Budget has made no allocation for the port in Iran in 2026-27. Chabahar had received ₹400 crore in allocation in the previous fiscal. Earlier in January, Indian officials here had stated New Delhi remains engaged with Tehran and Washington D.C. to work out a solution after American President Donald Trump announced on January 12 that any country that trades with Iran will end up paying 25% additional tariffs while trading with the U.S.

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The downturn in India’s relations with Bangladesh is also reflected in the Budget, with allocation halved to ₹60 crore (from ₹120 crore) for projects in Bangladesh in the coming year

Bhutan continued to top allocation at ₹2,288.55, an increase of ₹138. 56 crore over last year. India’s annual allocation for Bhutan supports several developmental activities and infrastructure projects.

Myanmar, another conflict-hit country in India’s neighbourhood, has also seen a cut in allocation, down to ₹300 crore this year from last year’s ₹350 crore.

Sri Lanka, on the other hand, receives ₹400 crore this year, an increase of ₹100 crore.

Nepal, which experienced political turbulence in 2025, has received ₹800 crore, an increase of ₹100 crore over the allocation last year.

The Ministery of External Affairs has been allocated ₹1,292 crore for international training programmes that are increasingly being seen as an important part of India’s soft diplomacy. Officials from other countries are trained in these programmes, which form a bridge between the Indian and foreign states.

Industry body CII on Sunday (February 1, 2026) welcomed the Union Budget proposal to establish dedicated rare earth corridors in Tamil Nadu, Kerala, Andhra Pradesh, Odisha stating it would help India’s leadership in rare earth magnets.

The Union Budget 2026 proposal towards establishment of Rare Earth Corridors would help promote mining, processing, research and manufacturing and thus help build India’s leadership in rare earth magnets and critical minerals, CII said in a statement on Sunday (February 1).

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While presenting her ninth consecutive budget, Union Finance Minister Nirmala Sitharaman said, a scheme for rare earth magnets was announced in 2020 and a dedicated rare earth corridors would be established in the four states.

Union Finance Minister Nirmala Sitharaman proposed to support the mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing dedicated rare-earth corridors, to push to secure India’s supplies of rare earth magnets.

Ms. Sitharaman was presenting her ninth consecutive Union Budget for the April 2026 to March 2027 in the Parliament on Sunday (February 1, 2026).

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The move comes as India looks to reduce its dependence on China for rare-earth minerals. Two of the four states, Tamil Nadu and Kerala, are set to go to Assembly elections in 2026.

Speaking in the Lok Sabha, Ms. Sitharaman said, “A scheme for rare earth permanent magnets was launched in 2025. We now propose to support the mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing dedicated rare-earth corridors to promote mining, processing, research and manufacturing.”

In November 2025, the Union government approved a new “first-of-its-kind” scheme to manufacture Rare Earth Permanent Magnets (REPM) in India, with a financial outlay of ₹7,280 crore.

The ‘Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets’ aimed to establish 6,000 metric tonnes per annum (MTPA) of integrated Rare Earth Permanent Magnet (REPM) manufacturing in India.

The total financial outlay of the scheme of ₹7,280 crore was to comprise a sales-linked incentives of ₹6,450 crore on REPM sales for five years and a capital subsidy of ₹750 crore for the setting up of an aggregate of 6,000 MTPA of REPM manufacturing facilities.