As India prepares for the presentation of the Union Budget 2026-27 on February 1, expectations are running high across sectors for measures that balance fiscal consolidation with growth stimulation. With the economy showing resilience amid global uncertainties, Budget 2026 is expected to focus on boosting consumption, sustaining public capital expenditure, simplifying taxation, and strengthening India’s long-term growth architecture.
Economic Backdrop Ahead of Budget 2026
India enters the Budget season with a relatively strong macroeconomic position. GDP growth for FY 2025-26 is projected in the range of 6.3 to 6.8 per cent, supported by domestic demand, infrastructure spending, and steady services sector performance. Inflation has moderated compared to earlier peaks, giving the government some room to calibrate fiscal support.
At the same time, the Centre remains committed to fiscal consolidation. The fiscal deficit target for FY 2025-26 is pegged at around 4.4 per cent of GDP. Budget 2026 is therefore expected to carefully balance welfare spending and capital investment without significantly straining public finances.
Income Tax Reforms and Relief for the Middle Class
One of the most anticipated aspects of Budget 2026 is personal income tax reform. Taxpayers, particularly the middle class, are expecting meaningful relief to improve disposable income and stimulate consumption.
There is strong demand for a revision of tax slabs under the new tax regime, including a higher tax-free income threshold and rationalisation of slab rates. Industry bodies have also sought an increase in standard deduction limits and enhanced deductions for health insurance premiums, especially in view of rising medical costs.
Simplification of return filing, faster processing of refunds, and reduction in compliance burdens are also expected to feature prominently as part of ongoing efforts to improve taxpayer experience.
Continued Emphasis on Capital Expenditure
Public capital expenditure is expected to remain a cornerstone of Budget 2026. Over the past few years, government-led infrastructure investment has played a critical role in supporting economic growth, and economists expect this momentum to continue.
The Budget is likely to provide enhanced allocations for roads, railways, ports, logistics, urban infrastructure and affordable housing. There are also expectations of renewed focus on the National Infrastructure Pipeline and asset monetisation to fund long-term projects without excessive borrowing.
Industry stakeholders are seeking incentives such as accelerated depreciation and investment-linked deductions to crowd in private capital alongside public spending.
GST Rationalisation and Ease of Doing Business
Goods and Services Tax reforms are another key area of expectation. Trade and industry have long demanded simplification of GST rate structures, reduction in classification disputes, and rationalisation of rates on essential goods.
There is also a growing call for clarity on penalty provisions, reduced litigation, and faster dispute resolution mechanisms. Streamlining GST compliance for MSMEs remains a priority, with expectations of procedural relaxations and simplified returns.
Such measures are seen as essential to improving ease of doing business and reducing the compliance burden on small and medium enterprises.
Support for Manufacturing, Exports and Strategic Sectors
Budget 2026 is expected to reinforce the government’s manufacturing and export push. Stakeholders are seeking enhanced incentives under production-linked incentive schemes, particularly for electronics, semiconductors, data centres, and high-value manufacturing.
Export-oriented sectors are looking for policy support to improve competitiveness amid global trade uncertainties. Measures such as rationalisation of customs duties, export credit support, and tax incentives for value-added exports are among the key expectations.
Technology-driven sectors, including artificial intelligence, digital infrastructure and clean energy, are also expected to receive targeted fiscal support to strengthen India’s position in emerging global value chains.
Renewable Energy, Clean Technology and Climate Goals
The renewable energy sector is seeking tax certainty and financial incentives to support India’s clean energy transition. Expectations include GST rationalisation for energy storage systems, tax incentives for green hydrogen projects, and support for domestic manufacturing of renewable energy equipment.
Clean technology startups and nuclear energy initiatives are also looking for enhanced research and development incentives, concessional financing and accelerated depreciation benefits to scale up operations.
Healthcare, Insurance and Social Sector Expectations
Healthcare and insurance reforms are expected to feature prominently, particularly measures to improve insurance penetration and affordability. Industry experts have sought higher tax deductions for health insurance premiums and policy interventions to ensure faster claim settlements.
There is also an expectation of continued support for social welfare schemes, with targeted spending on healthcare infrastructure, pensions and social security, while maintaining fiscal discipline.
Agriculture and Rural Economy
The rural economy remains a key focus area. Farmers and agri-industry stakeholders are seeking enhanced credit availability, targeted subsidies, and continued support for agri-infrastructure development.
Budget 2026 is expected to address issues related to farm incomes, irrigation, storage and supply chains, while aligning agricultural policy with sustainability and climate resilience goals.
Conclusion
Union Budget 2026 is expected to reflect continuity in policy direction while responding to emerging economic challenges. With its focus likely to be on tax relief, infrastructure investment, GST simplification and sector-specific incentives, the Budget will aim to support growth, boost consumption and strengthen investor confidence.
As Finance Minister Nirmala Sitharaman prepares to present her ninth consecutive Budget, the emphasis is expected to be on pragmatic reforms that reinforce macroeconomic stability while laying the foundation for India’s long-term economic transformation.
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