Union Budget 2026 falls short of attractive announcements for poll-bound Tamil Nadu

The much-anticipated Union Budget 2026–27, presented by Union Finance Minister Nirmala Sitharaman on Sunday (February 1, 2026), falls short of attractive announcements tailored to have immediate electoral appeal in the poll-bound State of Tamil Nadu.

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While there are a few broad sector-wise measures that would benefit the State, including export promotion measures on leather and sea-food sector, a semiconductor mission, and outlays for electronics component manufacturing and MSMEs, the Budget lacks standout announcements. The Finance Minister announced a rare earth corridor, two high-speed rail corridors, the development of Adichanallur archaeological site, and mountain trails and bird-watching trails.

Marginal increase in net proceeds

Tamil Nadu will receive 4.097% of the net proceeds of shareable Central taxes, as per the recommendations of the 16^th Finance Commission, which will take effect on April 1, 2026. This is slightly higher when compared to the 4.079% of the net proceeds of shareable Central taxes recommended by the 15^th Finance Commission. In other words, Tamil Nadu is expected to receive ₹62,530.65 crore as net proceeds of sharable Central taxes as per the Budget Estimate for 2026-27, which is higher than the Revised Estimate for 2025-26 of ₹56,819.23 crore.

Further, the Union government maintained the status quo with respect to the vertical share of devolution to State from the divisible pool at 41%, in accordance with the 16^th Finance Commission’s recommendations, though States like Tamil Nadu had demanded that it be increased to 50%.

Announcements for the State

Ms. Sitharaman announced seven high-speed rail corridors to promote environmentally sustainable passenger systems, which includes one from Hyderabad to Chennai and another from Chennai to Bengaluru. She also said the Union government has proposed to establish a dedicated rare earth corridor to promote mining, processing, research, and manufacturing in Tamil Nadu and a few other States.

The Union government will develop ecologically sustainable mountain trails in various mountainous regions in the country, which include Podhigai Malai in the Western Ghats, she said, adding that a bird watching trail will be established along the Pulicat Lake on the Tamil Nadu-Andhra Pradesh border.

The Finance Minister also said that as a part of development of heritage and cultural tourism, the Centre will develop 15 archaeological sites across the country, including Adichanallur in Thoothukudi district in Tamil Nadu. Excavated landscapes will be opened to the public through curated walkways. Immersive storytelling skills and technologies will be introduced to help conservation labs, interpretation centres, and guides, she said.

Some of the demands put forth by Tamil Nadu during the pre-Union Budget meeting held early last month included approvals for the Coimbatore and Madurai Metro Rail projects, funds due to the State under Samagra Shiksha Abhiyan and ‘Jal Jeevan Mission’, and the sanctioning of intra-State railway projects. However, they did not find mention in the Budget speech.