Budget 2026 to focus on defence, capex, infrastructure, fiscal discipline

New Delhi, Jan 31
As Finance Minister Nirmala Sitharaman gears up to table the Union Budget 2026-27 in Parliament on February 1, economists say the emphasis this year will be on defence, infrastructure, capex, power, and higher growth in affordable housing, apart from balancing social welfare with fiscal prudence.

Besides, policymakers will also balance growth priorities with fiscal discipline amid heightened global uncertainty.

The Budget is likely to strike a deft balance of sustaining growth momentum and maintaining fiscal consolidation.

It also needs to address near-term challenges emanating from unprecedented geopolitical flux, said economists.

The government has been steadfast on the path of fiscal consolidation, with the fiscal deficit easing from Covid induced high of 9.2 per cent to 4.4 per cent for FY26E (estimated).

According to experts, government will largely maintain its “fiscal rectitude and do not expect major deviation from this path”.

FM Sitharaman will present the 15th Budget of the PM Modi government on February 1. This will also be the second full Budget since the National Democratic Alliance (NDA) came to power for a third consecutive term in 2024. Sitharaman is also the first woman finance minister of the country to present the Budget in Parliament for the ninth consecutive time.

While the FY26 Budget was more tilted towards stimulating middle-class consumption with tax reliefs, the FY27 Budget’s approach to stimulating consumption will be selective, they added.

According to economists, the budget is likely to focus more on capital expenditure, especially in sectors deemed to be strategically important owing to prevailing geopolitical compulsions, said Motilal Oswal Financial Services Ltd in its ‘India Strategy’ report.

Meanwhile, investors are likely to be focused on the debt metrics, deficit outcome and scheduled borrowings for the next year Budget to align with strategic objectives. The size of borrowings will be an important consideration for the bond markets, said a note by DBS Bank.

Notably, the ‘Economic Survey 2025-26’ presented a comprehensive assessment of the economy, projecting FY27 growth at 6.8-7.2 per cent from 7.4 per cent this year, higher than street estimates.

Moreover, India’s stock exchanges will hold a regular live trading session on the Union Budget 2026-27 on February 1, despite being a Sunday.