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Union budget: Urban development, high-speed rail corridors to keep Uttar Pradesh on growth track
Union Budget gives Uttar Pradesh a boost, Varanasi key beneficiary with two proposed rail corridors, ship manufacturing centre and city economic region scheme
Uttar Pradesh’s share in the Union budget 2026-27 went up by approximately ₹34,000 crore to nearly ₹4.26 lakh crore, which includes central tax devolution and centrally sponsored schemes.
In the 2025-26 Union budget, Uttar Pradesh was allocated ₹3.92 lakh crore. Uttar Pradesh’s share in central tax devolution has gone up in absolute numbers from ₹2.55 lakh crore in 2025-26 to ₹2.68 lakh crore in 2026-27.
The state’s share in centrally sponsored schemes is projected to go up from ₹96,000 crore to approximately ₹1.10 lakh crore this year. Under the finance commission recommendations, UP is likely to get ₹20,000 crore.
The Union government has accepted the finance commission’s recommendation to retain the vertical share of tax devolution at 41% for states and UP’s share is 17.62%.
Tax devolution refers to the distribution of tax revenues between the central government and the state governments. It is a constitutional mechanism established to allocate the proceeds of certain taxes among the Union and the states in a fair and equitable manner.
Uttar Pradesh, which has a number of tier 2 and tier 3 cities, will also gain from the budget’s major thrust on regional urban development and focus on the development of city economic regions (CERs), with a proposed allocation of ₹5,000 crore per region over five years.
The budget contains key benefits for Varanasi, which will have two high-speed rail corridors -- Varanasi-Delhi and Varanasi-Siliguri and ship manufacturing and repair centres. Varanasi, Prime Minister Narendra Modi’s Lok Sabha constituency, is also expected to benefit from the City Economic Region scheme. The construction of the rail corridor will improve the state’s connectivity to eastern India and the Northeast.
Hostels for girls in districts and development of temple cities will also benefit Uttar Pradesh.
Chief minister Yogi Adityanath appreciated the budget for initiatives such as the construction of girls’ hostels in every district, and providing world-class infrastructure facilities to give wings to the aspirations of youth.
Uttar Pradesh finance minister Suresh Kumar Khanna said, “Increase in capital expenditure in the budget will accelerate the development of expressways, industrial corridors, logistics hubs, railways, and urban infrastructure in Uttar Pradesh, opening new avenues for investment.”
Commenting on tax devolution, Khanna said, “There will be no major impact, but yes it will be 17.6% instead of earlier 17.9%. But the fact is that Uttar Pradesh is a revenue surplus state and the government has decided to help the weak states or those in need more. The ratio is also an indicator that UP is developing. We are self-sustained and our financial position and financial discipline are strong and GSDP is good.”
The budget proposes to relax basic customs duties on cobalt powder, battery scrap, and other critical minerals, which are the raw materials used in lithium-ion battery manufacturing. Also concessions in customs duties and import duties related to solar, renewable energy, will benefit UP.
The biggest benefit will be to the grid-level battery storage and power system balancing. Battery storage will handle day-to-night and seasonal fluctuations better in solar-based power generation. This is expected to make Uttar Pradesh’s power supply more stable, reliable, and cost-effective, the state government said in a statement.
