The Union Budget is often reduced to an exercise in fiscal arithmetic, but at this juncture it must do more than balance numbers.
With the economy on a stable footing and no immediate crisis to manage, the Budget has a rare opportunity to focus on medium-term priorities rather than short-term firefighting.
India enters 2026 from a position of relative strength.
Growth has held up despite global turbulence, inflation has moderated, and public investment has remained robust. Yet this stability should not breed complacency.
The next phase of growth will depend less on momentum and more on policy choices—making Budget 2026 a defining moment.
The clearest signal the Budget must send is a shift from demand support to supply-side capacity building—without abandoning fiscal discipline.
With the debt-to-GDP trajectory improving, the government has room to rebalance spending toward productivity-enhancing investments.
Infrastructure must remain a priority, but the focus should widen beyond large projects to include MSMEs, innovation, and R&D, where returns are diffused but enduring.
Fiscal consolidation will rightly remain the anchor. A credible move toward the 4.5% fiscal deficit target by FY26 is non-negotiable, and a consolidation of about 0.5 percentage points of GDP would reinforce policy credibility. But discipline alone is not a growth strategy.
The assumptions underlying the Budget—especially a conservative 10.5% nominal GDP growth estimate—must translate into measures that revive demand and support investment.
On the revenue front, the government can no longer ignore the pressure inflation has placed on household consumption. Persisting with unchanged income tax slabs amounts to a silent tax increase.
If the new tax regime is to become the default, raising slabs and the basic exemption limit, ideally indexed to inflation, is essential. Without this, consumption recovery will remain fragile.
Equally urgent is correcting the bias in the taxation of savings. Concessional tax treatment for equity has encouraged financialisation, but it has also hollowed out bank deposits that help fund government borrowing.
A lower tax rate on long-term fixed deposit interest would restore balance and stabilize household savings without sacrificing fiscal prudence.
On the expenditure side, capital spending must broaden its reach. Concentrating capex on defense, roads, and railways has limits. Agriculture needs to be pulled into the investment cycle, with nationally coordinated projects such as river interlinking receiving priority.
Extending PLI schemes to MSMEs, with clear employment conditions, would further strengthen manufacturing and exports.
Finally, the Budget must start shifting welfare spending toward health and education.
Subsidies provide relief; social infrastructure creates capacity. With consolidation on track, the choice is clear: move from redistribution alone to long-term value creation.
By Dr.Gowri Ramachandran, Chairperson, Economic affairs committee in Hindustan Chamber of Commerce