Shrikant Pandey, Managing Director at Indiamanthan Publications
India heads into Union Budget 2026–27 with momentum. The latest Economic Survey projects FY27 real GDP growth at 6.8%–7.2% (fiscal year starting April 2026) and flags risks from geopolitics and weak exports. Budget 2026 will be judged on one outcome: can India keep investing for long-term growth while making household finances predictable?
1) Growth: capex continues, but “quality of spend” becomes the headline
Public capital expenditure (capex) remains a reliable growth lever. In Budget 2025–26, capex was earmarked at ₹11.21 lakh crore (3.1% of GDP) alongside a fiscal deficit target of 4.4% of GDP—growth with a visible fiscal boundary. Budget 2026 is expected to stay on this path, with sharper emphasis on projects that cut costs for business.
Likely priority areas:
- Urban infrastructure (transport, water, basic services)
- Logistics and rail (freight efficiency)
- Energy transition (grid, storage, renewables)
- Manufacturing ecosystems (clusters, supply chains)
Industrial output rose 7.8% year-on-year in December 2025, led by manufacturing—momentum worth reinforcing through execution, not just allocation.
2) Middle class: relief via simplification and cost-of-living realism
For salaried families, the pressure points are EMIs, education fees, healthcare, and daily expenses. So expectations from Budget 2026 centre on “breathing room” and fewer compliance shocks.
Two tax tweaks many experts are watching:
- Enhancement of the standard deduction
- Allowing housing-loan interest deduction for self-occupied property under the new tax regime
Equally important are system upgrades: faster refunds, cleaner TDS matching, and smoother dispute resolution—practical reforms that save money and mental bandwidth without big rate cuts.
3) Startups: policy certainty + talent incentives
India’s startup ecosystem is mature enough that stability now matters as much as scale. Budget 2026 is likely to face two core asks:
A) Close out legacy angel-tax disputes
Even after angel tax was removed earlier, many startups still report older demands that complicate fundraising and due diligence. A clean settlement/closure mechanism would quickly improve investor confidence.
B) Fix ESOP taxation so it aligns with real cash outcomes
ESOPs are critical for hiring, but employees often face tax complexity before they see cash. Nasscom has pushed for broader ESOP tax deferral coverage. Reports also suggest the government is considering expanding ESOP tax deferral beyond current narrow eligibility—an efficiency move that boosts retention without a big fiscal bill.
Startups will also watch continuity in incentives like the Section 80-IAC tax holiday framework for eligible DPIIT-recognised startups.
4) Jobs, MSMEs, and consumption: where the Budget gets “felt”
If Budget 2026 wants to be a turning point, it must translate growth into jobs—mainly through MSMEs. Expect focus on easier working-capital access, simpler compliance, and skilling linked to industry demand. On the household side, policy will likely prioritise “supply-side” fixes—better logistics and infrastructure—because that’s how inflation pressure eases without large subsidies.
Fiscal credibility remains the guardrail. Markets will watch whether the government keeps the deficit glidepath intact while sustaining capex, because that influences borrowing costs across the economy—home loans, business credit, and the cost of capital for startups.
What to watch on Budget Day
Households: standard deduction signals, housing/health-linked relief, refund and notice reforms
Startups: angel-tax legacy closure, ESOP deferral expansion, clarity on incentives
Economy: capex quality (not only size) and the fiscal path supporting long-term growth
Conclusion
Budget 2026 doesn’t need fireworks to be transformational. If it delivers disciplined investment, reduces taxpayer friction, and gives startups the certainty to hire and innovate, it can strengthen growth durably and restore middle-class confidence.
