Union Budget 2026: Budget 2026 Expectations: Focus Areas

Capital Expenditure and Infrastructure Development

Markets are of the view that the Union Budget for the upcoming financial year 202627 will be all about fiscal consolidation rather than populism and will provide room for an increase in capital expenditure in nontraditional sectors like defence and its allied sectors.

Analysts forecast that the government will sustain capital expenditure at about 3.13.2 percentage of the GDP, equating to about ₹12.4 trillion. Sectors with increased appropriations will likely include:

Defence sector related industries

Defence is : 

• INFRASTRUCTURE
• Pharmaceuticals and critical medicines
• Power and nuclear energy
• Electronics and Semiconductors

Critical Minerals Supply Chain

Customs Duty Rationalization The government may likely rationalise the existing custom duty slabs and the structure of tariff rates in the coming budget, with an objective of reducing litigations and making import duties more in sync with industry and trade concerns. It could be looking at reducing import duties on raw materials required on priority basis.

 Production Linked Incentive Scheme Expansion

“Product-linked incentives schemes could be extended to the emerging as well as existing manufacturing sectors such as the ‘green technology’ sector, the ‘pharmaceuticals’ sector, the ‘toys’ sector, and so forth with the aim of giving a boost to exports. This is due to the country’s aim to emerge as one of the important ‘manufacturing destinations’ in the context of global ‘supply chain diversification.'”

MSME and Export Support

Small and medium enterprises drive India’s economy and play a major role in providing employment to people in general. MSME sector and exporters can get more support in terms of credit guarantees and interest subvention schemes, and in addition to this, more funds can go to the Export Promotion Mission.

Fiscal Consolidation

Any positive surprises that may come through debt/GDP and the fiscal deficit/GDP path from their projection of 4.4 percent as presented in the budget for FY26 would help to smooth out the heightened bond yields and interest rates, favoring investments flowing into the economy through the private sector. The government stands poised for an easy balancing act between prudent fiscal management and support to growth.