India’s Union Budget for 2026–27, presented on 1 February, arrives at a time of global economic realignment, marked by shifting capital flows and the reconfiguration of supply chains. For the United Kingdom, the Budget is particularly significant. It coincides with the anticipated ratification of the UK–India Free Trade Agreement (FTA) and outlines a series of fiscal, regulatory and trade-facilitation measures that could reshape how British firms engage with the Indian economy, with implications also for the British Indian diaspora that has long acted as a commercial bridge between the two countries.
For international businesses, the Budget reinforces policy continuity, a critical factor in long-term investment decisions. A public capital expenditure outlay of ₹12.2 trillion is directed towards industrial corridors, ports, multimodal transport and logistics infrastructure. These investments are expected to lower distribution costs and reduce working-capital pressures across manufacturing and consumer-facing sectors operating pan-India supply chains.
Tax reform forms a central pillar of the fiscal agenda. From April 2026, a simplified income tax framework is to be introduced alongside streamlined compliance systems and reduced litigation thresholds. Together, these measures aim to improve predictability, lower administrative burdens and reduce friction for foreign companies operating in India.
The digital economy is a clear beneficiary of the new Budget. Foreign cloud-service providers establishing data centres in India will be eligible for a tax holiday until 2047, while a 15 per cent safe-harbour regime will apply to certain related-party service transactions. These provisions strengthen India’s position as a regional digital infrastructure hub, relevant for UK firms running global capability centres, analytics platforms and financial-technology operations.
Customs and trade facilitation reforms also feature prominently. The Budget outlines expanded digital single-window clearances, wider use of risk-based inspections and fewer physical checks at the border. Alongside rationalised customs duties and digitised export documentation, these measures are intended to reduce delays and improve supply-chain reliability for importers and exporters alike.
For British companies considering greenfield investment or manufacturing expansion, the Budget emphasises regulatory stability and export-oriented growth. Continued support for plug-and-play industrial parks, logistics hubs and industrial estates lowers entry barriers, while preferential tax treatment for businesses operating within international financial centres enhances India’s appeal as a base for regional professional services and treasury operations.
These domestic reforms gain further relevance in the context of the forthcoming UK–India FTA. Once implemented, tariff liberalisation and improved access for services will interact with Budget-driven infrastructure creation to strengthen the commercial case for locating production or service delivery in India, whether to serve its large domestic market or export to third countries.
The timing is notable. UK–India trade has expanded steadily in recent years. In the year to the third quarter of 2025, UK exports to India reached £18.9 billion, while imports from India stood at £28.5 billion. Services accounted for nearly two-thirds of UK exports, a segment likely to benefit from improved regulatory coordination and digital connectivity.
Sector-specific opportunities are emerging on both sides. Advanced engineering, pharmaceuticals, chemicals, financial advisory and education services in the UK may gain from smoother procedures, while Indian exporters to the UK, particularly in apparel, automotive components and IT services stand to benefit from faster turnaround times and more resilient logistics.
The Budget also carries implications for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) in the UK. Liberalised portfolio investment rules now allow overseas individuals to raise holdings in Indian listed companies from 5 per cent to as much as 24 per cent. In parallel, the rationalisation of tax-deduction requirements on certain remittances and cross-border payments should reduce friction for families, entrepreneurs and investors maintaining financial links with India.
Taken together, India’s Union Budget 2026–27 reflects a deliberate effort to align domestic reform with outward-facing trade strategy. Infrastructure investment, tax simplification, digital-economy incentives and customs modernisation form a coherent policy package that complements the strategic intent of the UK–India Free Trade Agreement. For British firms and the diaspora alike, this year could mark an important step towards a more integrated and commercially significant UK–India economic partnership.
