Union Budget 2026: Morgan Stanley Highlights Reform Priorities Across Defence and Auto Sectors

With the Union Budget 2026 scheduled for February 1, 2026, significant policy expectations are emerging across key sectors.  

Investment banking major Morgan Stanley flags the key reforms needed from electric vehicles to clean energy and defence production.  

The budget is anticipated to reveal sector-aligned initiatives addressing economic needs and infrastructure development. 

Major Sectoral Proposals Under Union Budget FY26 

Investment in social and physical infrastructure remains a core focus. Proposals aim at improving ease of doing business, job creation through skill development, and enhancing domestic manufacturing capabilities.  

Housing, employment, and infrastructure continue to lead budgetary interests alongside digital and green energy sectors. 

Automobile: EV Push and Manufacturing Incentives 

The automobile sector expects increased financial assistance for electric vehicle (EV) infrastructure. Policy clarity regarding domestic manufacturing of sintered rare earth permanent magnets is anticipated. These magnets are critical for EV motors, and their domestic production may support India’s EV adoption plans. 

Real Estate: Loan Subsidy Reforms and Price Cap Adjustments 

Changes under the revised tax regime allowing interest deductions on home loans for self-occupied properties are under consideration.  

Enhancing affordability, reintroduction of Credit Linked Subsidy Scheme (CLSS) and revision of property price cap from ₹45 lakh to ₹75 lakh have also been proposed to reflect construction cost escalations. 

Read More: Union Budget 2026: Electricity Amendment Bill Expected in Parliament Session! 

Telecom and Data Infrastructure Development 

In telecom, relief is anticipated concerning Universal Service Obligation Fund (USOF) charges. Adjusted gross revenue reforms, tax exemptions on licence fees and spectrum usage, and custom duty waivers on imported equipment are being proposed to promote data centres and network expansion. 

Defence and Energy Generation Targets 

In defence, allocation is expected to rise by 12% to 15% with focus on supporting local and private manufacturers. Energy sector priorities include Bharat Energy Storage System (BESS), nuclear including small modular reactors, and pumped storage initiatives for continued focus on clean energy. 

Conclusion 

The Union Budget 2026 outlines targeted measures across diverse sectors including defence, energy, automobile, and telecom. Provisions around infrastructure, affordability, taxation, and manufacturing enhancement form the crux of anticipated reforms. 

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