Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2026-27 on Sunday, February 1. The government has placed a strong focus on urban infrastructure and the strengthening of public financial institutions. Among the key announcements, the proposal to reward Municipal Corporations for raising funds through bonds stands out as a major move to boost city development.
Incentive for Municipal Bonds
The government has introduced a special incentive to encourage large cities to generate their own funds for infrastructure projects. According to the proposal, any Municipal Corporation that issues a single bond worth more than ₹1,000 crore will receive a direct incentive of ₹100 crore from the center.
This initiative is aimed at helping big cities finance their own urban infrastructure needs like better roads, sewage systems, and water supply. While this specific benefit is for larger bond issues, the Finance Minister clarified that existing support schemes for smaller and medium-sized cities will continue as before.
Restructuring of REC and PFC
Another significant announcement involves the restructuring of two major state-owned non-banking financial companies, REC Ltd and Power Finance Corporation (PFC). The government plans to reorganize these entities to increase their scale and improve their operational efficiency. This is part of the broader strategy to support the ‘Viksit Bharat’ goal by strengthening public lending institutions.
The stock market reacted positively to this news immediately after the announcement. Investors showed confidence in the move, leading to a rise in share prices. PFC shares climbed by approximately 4% to 6%, while REC shares saw an increase ranging from 2% to 4.3% during the trading session.
Key Figures and Other Announcements
The budget also highlighted important financial targets for the coming year. The capital expenditure (Capex) target has been raised to ₹12.2 lakh crore for FY27, which is an increase from the previous year’s ₹11.2 lakh crore. The fiscal deficit is estimated to be around 4.3% of the GDP.
For the MSME sector, the government proposed a ₹10,000 crore SME Growth Fund and an additional ₹4,000 crore for the Self Reliant India Fund. A high-level committee will also be formed to look into ‘Banking for Viksit Bharat’ to ensure the banking sector is ready for future challenges.
