Budget 26: FM proposes new DFC connecting West Bengal to Gujarat

Finance Minister Nirmala Sitharaman has projected a 7.4% growth rate for the fiscal year ending March 31, fueled by strategic government spending and tax cuts that have successfully revitalised consumer demand.

The Finance Minister announced an increase in capital expenditure (Capex) for the upcoming financial year (FY27) and unveiled major infrastructure projects aimed at multimodal logistics and strategic mineral security.

The budget’s logistics push is the proposal for a new Dedicated Freight Corridor (DFC) connecting Dankuni in West Bengal to Surat in Gujarat.

This high-capacity corridor will link the mineral-rich eastern belt with the industrial and export hubs of the west. By segregating freight from passenger traffic on this critical artery, the government aims to drastically reduce turnaround times and logistics costs for heavy industries.

Complementing rail transport, the Finance Minister also announced plans to operationalise 22 new national waterways over the next five years. This blue economy push is designed to shift bulk cargo to cheaper, greener modes of transport, creating a truly multimodal logistics network.

The budget addresses critical raw material security, a key concern for modern supply chains. Building on the scheme for rare earth permanent magnets launched in November 2025, Sitharaman announced the creation of ‘Dedicated Rare Earth Corridors’.

These corridors will be established in the mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.

"We now propose to support these states to establish dedicated rare earth corridors," Sitharaman stated.

Funding the future: ₹12.2 lakh crore capex
To fund this logistics overhaul, the government has raised its capital expenditure target to ₹12.2 lakh crore for FY27, up from ₹11.2 lakh crore in the previous budget estimate.

The Finance Minister highlights that this spending will not be limited to metros. The strategy involves transforming Tier 2 and Tier 3 cities (with populations over 5 lakh) into new logistical growth centers.

"Public capital expenditure has increased manifold from ₹2 lakh crore in 2014-15. We shall continue to focus on developing infrastructure in these expanding cities to continue the momentum," Sitharaman noted, highlighting the use of financing instruments like InvITs (Infrastructure Investment Trusts) to monetise and sustain these assets.

Customs duty to lower costs for cancer drugs, EVs, solar tech
The Union Budget 2026, also aimed at growth in critical sectors including clean energy, aviation, marine exports, and life-saving healthcare. These duty changes are designed to lower production costs, enhance India's global competitiveness, and improve healthcare accessibility.

To accelerate India's energy transition, the budget provides relief for the renewable sector which includes a full customs duty exemption on capital goods used for manufacturing lithium-ion cells and battery energy storage systems (BESS), directly supporting the electric mobility and grid stability push.

Furthermore, sodium antimonate, a crucial input for solar glass, is now exempt from customs duty. In a long-term policy move, basic customs duty (BCD) exemption is granted for goods required for nuclear power projects until 2035, and capital goods for processing critical minerals within India are also exempt from BCD, strengthening the domestic supply chain for high-tech industries.

In the healthcare sector, the Budget addresses the high cost of specialised treatment by proposing major duty cuts on essential medicines. Basic customs duty has been exempted for all medicines used in cancer treatment.

Additionally, seven new drugs for rare diseases have been added to the exempted list, and duties have been reduced on 17 other specific drugs, collectively making specialised healthcare more affordable for patients across the country.

Finally, the budget focuses on boosting service and export sectors, particularly aviation and marine exports. To position India as a global hub for aircraft Maintenance, Repair, and Overhaul (MRO), BCD has been exempted on raw materials imported for MRO operations and reduced on components used in manufacturing civilian aircraft.

For the Blue Economy, the limit for duty-free import of inputs used in seafood processing has been significantly tripled from 1% to 3% of the previous year’s export turnover, a strategic move expected to provide a substantial boost to India's marine export volumes.