India is set to spend a record amount on infrastructure and defense, Finance Minister Nirmala Sitharaman told parliament on Sunday.

New Delhi plans to invest $133 billion (€112 billion) in infrastructure and $85 billion on defence — an increase of around 9% and 15%, respectively, compared to last year's budget.

The finance minister also announced that the government will scale up manufacturing across seven strategic sectors. They include pharmaceuticals, semiconductors, rare earth magnets, chemicals, capital goods, textiles and sports goods.

"India will continue to take confident steps towards Viksit Bharat (Developed India), balancing ambition with inclusion," said Sitharaman in her national budget speech for the 2026-2027 financial year.

Modi: India 'not content' with just being fastest-growing economy

This is the first Indian budget since US President Donald Trump imposed 50% tariffs on Indian goods in August as punishment for buying Russian oil.

After the budget presentation, Prime Minister Narendra Modi said, "India is not content with simply being the fastest-growing economy."

"India wants to become the world's third-largest economy. This year's budget presents an ambitious roadmap to give new momentum to" domestic manufacturing and self-reliance, Modi added.

India hikes defense budget

The defence spending increase comes after a four-day conflict with Pakistan in May 2026 which saw the two neighbors making extensive use of drones as well as missile and artillery barrages.

Defence Minister Rajnath Singh said the "unprecedented" hike would bolster India's armed forces with new fighter jets, drones, ships, submarines and other critical hardware. 

"It is in the best interest of the nation," he said, adding that the budget reflects Modi's vision of a self-reliant India and a developed India by 2047. 

Plans for high-speed rails, rare earths corridors, AI data centers

The budget highlights plans for seven high-speed rail corridors connecting major economic hubs, including Mumbai, Bengaluru, Hyderabad, Pune and Chennai.

"In order to promote environmentally sustainable passenger systems, we will develop seven high-speed rail corridors between cities as growth connectors," said Sitharama.

She also unveiled a push to build "rare earth corridors" in four mineral-rich states in southern and eastern India — Tamil Nadu, Kerala, Odisha and Andhra Pradesh.

Data centers and artificial intelligence will also receive government support, according to the finance minister.

"I propose to provide a tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data center services from India," Sitharaman told the parliament. 

Edited by: Dmytro Hubenko