As India gears up for Finance Minister Nirmala Sitharaman’s ninth consecutive Union Budget on February 1, 2026—the first ever to be presented on a Sunday—expectations are anchored in one central question: can New Delhi sustain high growth while the global economy stumbles through uncertainty? With GDP projections in the 7–7.5% range, the budget is widely seen as a bridge between immediate economic resilience and the long-term ambition of Viksit Bharat @2047—the vision of a fully developed India by the centenary of Independence.
This will not merely be a ledger of revenues and expenditures. It is expected to double down on structural reform, an aggressive infrastructure push, and the strategic nurturing of future-facing sectors such as artificial intelligence, green energy, advanced manufacturing, and semiconductors. The government’s consistent bet on capital expenditure, self-reliance under Atmanirbhar Bharat, and digital public infrastructure has already reshaped India’s economic narrative. Budget 2026–27 is likely to sharpen that trajectory.
A Sunday Signal in a Turbulent World
The symbolism of a Sunday budget presentation is hard to miss. It reflects a sense of urgency—an attempt to front-load fiscal intent ahead of the new financial year, the festive consumption cycle, and a politically charged calendar of state elections. Markets and investors will read it as a signal that policy execution, not just policy intent, will be accelerated.
Externally, the headwinds are real. A potential return of protectionist trade policies in the United States under a Trump 2.0 administration—rumored to include 10–20% tariffs on select imports—could pressure India’s $80 billion-plus export exposure to the US market. Europe’s sluggish recovery and China’s deflationary tendencies further underline the fragility of global demand. In this backdrop, India’s strategy is increasingly clear: insulate growth through domestic demand, diversify export markets, and embed itself deeper into resilient supply chains.
The recently concluded India–EU Free Trade Agreement is expected to feature prominently in the budget narrative. With duty-free or preferential access for over 90% of Indian exports to the European bloc, the agreement offers a lifeline to labour-intensive sectors such as textiles, leather, engineering goods, and pharmaceuticals—precisely the industries that translate growth into jobs.
Government’s Fiscal Position: Headroom Without Recklessness
On the fiscal front, New Delhi enters Budget 2026–27 from a position of relative strength. The fiscal deficit is targeted at 4.4% of GDP for FY26, with a further glide path toward the 4–4.1% range in FY27. This is part of a broader shift toward a debt-anchored framework, which aims to bring the Centre’s debt-to-GDP ratio down to 50% (±1%) by March 2031, from the current 56–57% band.
Revenue buoyancy has provided breathing room. GST collections have consistently hovered around the ₹2 lakh crore monthly mark, while direct tax inflows continue to post high double-digit growth. Strategic disinvestment and asset monetisation—through entities such as BPCL, CONCOR, and infrastructure investment trusts—are expected to supplement the exchequer.
Capital expenditure is likely to cross ₹12 lakh crore, reinforcing the government’s conviction that public investment can crowd in private capital. The multiplier logic remains central: every rupee of public capex is estimated to generate ₹2.5–₹3 in broader economic activity. With nominal GDP growth assumed at around 10%, policymakers believe they can maintain this investment momentum without stoking inflation beyond the RBI’s comfort zone.
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That said, risks remain. Off-balance-sheet liabilities, including legacy borrowings of the Food Corporation of India, and the vulnerability to global oil price shocks—particularly if crude breaches the $80-a-barrel mark—continue to shadow the fiscal arithmetic. Yet, adherence to FRBM discipline has reassured industry bodies like CII and FICCI that the government will pursue “measured support” rather than fiscally reckless populism.
Joint Taxation for Couples: A Middle-Class Inflection Point?
Among the most closely watched pre-budget discussions is the proposal for optional joint taxation for married couples, championed by the Institute of Chartered Accountants of India (ICAI). India’s current system taxes individuals separately, often placing dual-income or single-earner households at a relative disadvantage.
Under the proposed framework, couples could choose to file jointly, combining incomes to optimise tax slabs and deductions. Early models suggest potential annual savings of ₹50,000 to over ₹1 lakh for middle-income households. The structure draws inspiration from systems in the US—where joint filers receive higher standard deductions—and Germany, which splits household income for tax computation.
Proponents argue that such a move would boost disposable income, simplify compliance, and improve tax transparency, potentially curbing evasion. Critics, however, raise concerns about legal complexities around asset division and the treatment of non-earning spouses. If adopted, the reform could debut in Assessment Year 2027–28 and reshape the tax landscape for an estimated 5–7 crore households.
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Sector-Wise Expectations
Automotive and EVs
The industry is pushing for an expansion of PLI schemes for batteries, semiconductors, and advanced components. A renewed FAME-III push, investment in 100,000 charging stations, and duty rationalisation on critical minerals could accelerate India’s EV adoption, projected to reach 30% of new vehicle sales by 2030.
Agriculture
Priorities include higher Kisan Credit Card limits, a major push for post-harvest infrastructure to cut wastage, expanded use of drones and AI for precision farming, and stronger incentives for crop diversification toward pulses and oilseeds to reduce import dependence.
Railways
A double-digit increase in capex is expected, focusing on Vande Bharat train manufacturing, full operationalisation of Dedicated Freight Corridors, and deeper private participation through EPC and PPP models.
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Real Estate and Urban Infrastructure
The sector is seeking higher home-loan interest deductions, GST rationalisation for under-construction properties, and infrastructure status for large housing and commercial projects, especially data centres and Global Capability Centres (GCCs).
Healthcare
Spending is likely to edge closer to 2.5% of GDP, with expansions in Ayushman Bharat coverage, hospital infrastructure, telemedicine, and preventive healthcare aimed at reducing out-of-pocket expenditure, which still accounts for nearly 60% of total health spending.
Renewable Energy and Power
With a 500 GW non-fossil capacity target by 2030, allocations for solar manufacturing, battery energy storage systems, and national grid upgrades are expected to rise sharply.
Defence
A 10–12% increase in capital outlay is anticipated, with a sharper focus on indigenisation, R&D under the iDEX framework, and export promotion for domestically manufactured platforms.
Stability, Strategy, and Scale
The Union Budget 2026–27 is shaping up as a calibrated exercise in economic statecraft rather than a populist spectacle. Its core message is likely to be one of continuity with conviction: sustained public investment, targeted tax and regulatory reforms, and sector-specific incentives aligned with global trade realignments such as the India–EU FTA.
If executed well, it could accelerate India’s march toward a $5 trillion economy, deepen its manufacturing base, and generate the 7–8 million non-farm jobs annually needed to absorb a young and expanding workforce. In a world increasingly defined by fragmentation and protectionism, Budget 2026–27 has the opportunity to position India as an island of growth, stability, and strategic economic confidence. (You can reach out to the author at srinivasbg@invictusfinserv.com)
