From Capex To Consumption: Where Budget 2026 Will Really Spend?

Infomerics Valuation and Ratings Ltd has come out with a report on "Union Budget Expectations 2026-27: Stability Over Surprise" by Dr. Manoranjan Sharma, Chief Economist, Infomerics Valuation and Ratings Ltd. The report provides an insightful view of GDP Growth and Demand Composition, Industrial Competitiveness, Private Sector Participation and Corporate Tax.

Key highlights of the report are given below:

• Budget 2026-27 will be presented amid elevated global uncertainty, geopolitical tensions, and uneven global growth, underscoring the need for stability, predictability, and domestic resilience rather than policy shocks.
• India's growth outlook remains strong, with real GDP projected at 7.4% in FY26 and 7-7.5% in FY27, driven by public capex, services strength, and resilient domestic demand.
• The Budget is expected to prioritise investment-led growth, with central government capex maintained around Rs 12-12.5 lakh crore (~3.2% of GDP), focusing on infrastructure, transport, energy transition, and urban development.
• Given global monetary tightening and volatile capital flows, fiscal prudence and credible consolidation will be key, with markets watching the glide path toward a ~4.2% fiscal deficit in FY27.
• With external demand likely to stay moderate, policy emphasis is expected to remain on domestic demand drivers-consumption, infrastructure spending, and structural reforms-while supporting export competitiveness.
• Agriculture and rural demand are likely to receive continued support through higher allocations for irrigation, rural infrastructure, climate-resilient farming, post-harvest logistics, and digital agriculture initiatives.
• MSMEs are expected to remain a policy focus, with measures aimed at easier credit access, expanded credit guarantees, digital formalisation, skilling, and integration into domestic and global value chains.
• The Budget may deepen the 'Make in India' and PLI framework, targeting strategic sectors such as electronics, defence, medical devices, critical minerals, and clean energy, alongside logistics and supply-chain reforms.
• Private investment revival is seen as critical, with expectations of tax incentives, regulatory simplification, PPP strengthening, and improved access to long-term finance to crowd in private capex.
• On taxation, the emphasis is likely on policy stability and simplification, with possible limited personal income-tax rationalisation, stable corporate tax rates, GST compliance easing, and calibrated customs duty changes.