The upcoming Union Budget 2026–27 is expected to be driven by a sweeping reform agenda—dubbed “Reform Express”—spanning trade, MSMEs, education, employment, rural livelihoods, power, and finance, according to sources.
The overarching objective is to simplify regulations, enhance competitiveness, strengthen domestic manufacturing, and align institutions, skills, and delivery systems with India’s long-term growth ambitions.
“Overarching reforms will likely be the theme of the Budget 2026–27,” a senior official said, adding that the government plans to systematically implement several long-pending reforms across ministries over the next financial year.
Against a backdrop of a global economic slowdown and renewed tariff pressures from the US, these reforms are seen as critical to sustaining growth, attracting investment, and building an export-led economic momentum.
Trade and Customs Reform
A major reform thrust is expected in the customs and trade regime. The Budget may announce a significant rationalisation of customs duties, particularly on critical raw materials and intermediate goods, alongside procedural simplification.
Officials emphasise that customs reform must go beyond tariff cuts to focus on structural rationalisation that supports domestic manufacturing, exports, and integration into global value chains.
India’s weighted average customs duty, currently around 12%, remains well above the roughly 5% average among leading global economies and may be reduced substantially in a phased manner.
The government is also considering promoting around 100 products for domestic manufacturing to reduce import dependence and enhance economic resilience. In parallel, export promotion frameworks are likely to see a major overhaul.
Special Economic Zones (SEZs), Export Oriented Units (EOUs), and the Manufacture and Other Operations in Warehouse Regulations (MOOWR) currently operate under fragmented policy and administrative structures, diluting their effectiveness and increasing compliance burdens.
Officials say these schemes should be merged into a single Unified Export and Manufacturing Zone (UEMZ) framework.
Domestic Market Integration
Significant changes to SEZ norms may also be announced to allow easier access to the domestic market and help firms cope with external tariff shocks, said Sandeep Vempati, Economist and Member, Bharatiya Janata Party.
Measures to deepen value addition for exports and provide impetus to cooperatives in manufacturing are also under consideration.
With net-zero goals in focus, the Budget could expand the Production-Linked Incentive (PLI) scheme to cover polysilicon, ingots and wafers, solar glass, and introduce accelerated depreciation for green hydrogen investments, Vempati said.
Power sector reforms are another key area. The government is likely to introduce the Electricity (Amendment) Bill during the Budget session to open up power distribution to greater private participation and address the persistent financial stress of distribution companies. A debt restructuring package linked to reform milestones may also be announced, sources said.
State Capital Support
To sustain the investment cycle at the state level, the 50-year interest-free capital expenditure loans to states are expected to continue, with a possible increase in outlay for FY27 from the estimated ₹1.5 lakh crore in FY26.
The Centre may also unveil a framework to strengthen institutional capacity in states, with a sharper focus on service delivery, citizen-centric governance, and outcome-based implementation, sources said.
Financial sector reforms—including higher foreign investment limits in public sector banks and other next-generation reforms—are expected to strengthen the overall credit and investment environment.
Ease of doing business remains a core priority, with the Budget likely to announce a revamp of the National Single Window System by expanding integration with remaining central ministries, states, districts, and urban local bodies, and enabling compliance support throughout the business lifecycle.
Other expected initiatives include a National Data Centre Policy to attract investment, a National Bill on Slum Redevelopment to improve ease of living and economic opportunity, and the drafting of a comprehensive National Environmental Policy to unify fragmented climate and sustainability measures while unlocking new growth avenues.
On other fronts, support for MSMEs through enhanced financing, credit access, and incentives is likely to be expanded, alongside targeted measures to boost employment, particularly for youth.
Rural employment reforms are already underway with the enactment of the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, which may guide the alignment of multiple schemes going forward.