Budget Expectations Highlights: Finance Minister Nirmala Sitharaman will present the 88th Union Budget of India on February 1. Fiscal deficit improvement and policy thrust towards reviving consumption in the rural and urban regions amid the slowing global environment are likely to be the focus of the general budget this year.
Major industry bodies and leading economists expect that Budget 2026 will prioritise targeted support over headline-grabbing capex announcements. They expect the government to build on last year’s tax relief and GST rationalisation to sustain household demand, even as fiscal space remains constrained.
Budget 2026 focus areas
Consumer boost, fiscal and policy support, MSME growth, defence investment boost, and a railways and infrastructure package are the key areas where the budget is likely to focus this year, say experts.
ICRA, a rating agency, expects railways to remain a key beneficiary. With electrification largely complete, the emphasis is likely to shift towards easing congestion and expanding capacity through new lines, track doubling, gauge conversion and progress on dedicated freight corridors.
Key expectations
According to the PHD Chamber of Commerce and Industry, an Industry body, the government is urged to improve access to finance, reduce regulatory friction, and lower compliance costs to enhance global competitiveness.
Budget 2026 is expected to carry forward last year’s consumption push. Under the revised regime, income up to Rs 12 lakh was exempt from tax, rising to Rs 12.75 lakh for salaried taxpayers after the standard deduction. Tax slabs were rationalised across income levels, while TDS and TCS norms were eased.
Budget Expectations 2026 LIVE Updates: Morgan Stanley expects headline CPI inflation at 4-4.2%
For the inflation levels, Morgan Stanley expects the headline CPI to align with RBI's medium term target of 4% YoY in F2027, up from 2% recorded in F2026.
It added that food prices are likely to be affected because of the weak base, and the trend in core inflation is likely to remain "well behaved". It added that it expects both food and core CPI coverage to roughly 404.2% YoY.
Budget Expectations 2026 LIVE Updates: Infosys co-founder says spending on research a way to accelerate Indian economy
Kris Gopalakrishnan, the co-founder of Infosys and philanthropist says that even though the industry has cash reserves yet the spending on research is not happening. He added that the such may be the case because of profit tend to decline in short term as R&D spending increases.
“I do not see any alternative to tax breaks. Industry has cash reserves, but spending on research is not happening. May be because they get punished by the markets in the short term since profits decline as R&D spending increases." Gopalakrishnan said.
He has maintained his stance that a boosted research spending will help accelerate Indian economy.
Read more: Budget 2026: India Inc., on how India grows & positions itself globally matters now
Budget Expectations 2026 LIVE Updates: Infosys co-founder says spending on research a way to accelerate Indian economy
Kris Gopalakrishnan , co-founder of Infosys and philanthropist, says that he does not expect any spending on research in the upcoming budget. “I do not see any alternative to tax breaks. Industry has cash reserves, but spending on research is not happening," he said.
He added that the profits in R&D tend to decline in the short term which might be the case for low funding in research.
For several years, Gopalakrishnan has maintained the view that a more sharper focus on boosting research can accelerate the Indian economy.
Read more: Budget 2026: India Inc., on how India grows & positions itself globally matters now
Budget Expectations 2026 LIVE Updates: Crisil expects low pvt investment, Icra expects capec to remain measured
Ratings Agency Crisil suggests that FY26 will continue to witness subdued private investments owing to tariff related uncertainty and global volatility. Whereas, Icra expects private capex to remain measured for FY26 despite the steady revenue and margin growth reported in December quarter. This growth is supported by rural demand and benign commodity prices.
Budget Expectations 2026 LIVE Updates: HM Bharuka on govt support in real estate
HM Bharuka, former vice-chairman and managing director of Kansai Nerolac and currently an independent director at Avenue Supermarts, which operates DMart stores, said that government support in the real estate sector for the upcoming budget could help boost demand.
“If the government can do something for the real estate sector, like it did for the auto industry via GST cuts, it would give reason for the private sector to invest. Concessions on tax related to housing loans, for instance, would give an impetus to real estate,” he said, adding that this would also help enhance cement and steel investments.
Harsh Mariwala, chairman of Marico, told Financial Express that the Union Budget 2026 could help by simplifying customs duties and improving demand conditions.
“I am of the view that reforms can happen irrespective of the Budget. Having said that, as far as private sector investment is concerned, I don’t think businesses don’t want to invest. They do want to invest. But they will do so if there is demand. Hopefully, with the GST rate rationalisation in place, there are signs of a demand pick-up. Once that happens, investment will kick in,” he said.
Read more: India Inc flags Budget levers to unlock private capex
Budget Expectations 2026 LIVE Updates: Gautam Singhania expects upcoming budget to drive domestic growth
According to Gautam Singhania, CMD, Raymond Group, the upcoming coming Union budget presents India with the opportunity to inch closer towards its Viksit Bharat goal. Government support can help boost demand across sectors like retail and real estate.
Also, he expects the forthcoming budget to help drive the 'Make in India' initiative as India and EU come close to a trade deal. this will further strengthen the country's export competitiveness across sectors like textiles, and manufacturing.
Singhania also said that India is well positioned in the advanced manufacturing segments such as aerospace and defence.
" Policy support that encourages technology adoption and capital efficiency will enable Indian manufacturers to move from assembly led operations to becoming integral partners in global value chains. A Budget that balances fiscal discipline with an emphasis on manufacturing scale will reinforce India’s position as a trusted alternative in the global economy.” Singhania added in the note.
Budget Expectations 2026 LIVE Updates: Morgan Stanley expects fiscal deficit for FY2027 at 4.2%
According to a report published by Morgan Stanley, the central government will fiscal deficit at 4.2% of GDP in F2027 as compared to its target of 4.4% of GDP for F2026. It added that this would mark the shallowest pace of consolidation since F2023.
"The pace of consolidation will be consistent with central government debt reduction to 55.1% of GDP from 56.1% in F2026," the report added.
This pickup in nominal growth will help lift tax buoyancy and improve tax collections in F2027, the report added.
"Over the medium term, we envisage the government needing to undertake gradual consolidation to meet its target of government debt to GDP at 50% of GDP (±1ppt) by F2031," the report said.
Budget Expectations 2026 LIVE Updates: Fiscal consolidation on track in Budget 2026
Industry body ASSOCHAM said Budget 2026 is expected to stay the course on fiscal consolidation, with the government reaffirming its target to narrow the fiscal deficit to 4.4% of GDP in FY2025–26 from 4.8% a year earlier.
Interim figures show the fiscal deficit had reached around 36.5% of the full-year target by the end of the first half of FY2026, higher than about 29% in the same period last year, even as capital expenditure rose nearly 40%.
Budget Expectations 2026 LIVE Updates: Union Budget opportunity to ease global investing for Indian investors
“Indian investors are increasingly viewing global investing as a long term diversification strategy rather than a short term opportunity. With goals ranging from retirement planning to overseas education and dollar denominated exposure, this trend reflects a structural shift in investor behaviour. In this context, the upcoming Union Budget presents an opportunity to support this evolution by reducing friction and enabling smoother participation in global markets. Easing global investing under the LRS through measures such as building on the higher TCS threshold and rationalising TCS rates can enhance liquidity and make long term overseas allocation more seamless.
At the same time, strengthening GIFT City as India’s global investment gateway complements these efforts. Clear tax neutral treatment for outbound investments and global funds can help India align with leading international financial hubs and encourage structured, goal based allocation to global assets. Maintaining the USD 250,000 LRS limit provides stability, allowing investors to plan global diversification with confidence and discipline in a world of currency volatility and evolving capital flows," says Viram Shah, Founder and CEO of Vested Finance.
Budget Expectations 2026 LIVE Updates: ASSOCHAM recommends credit support fro MSMEs
ASSOCHAM recommended that the government ensure strict enforcement of payment timelines to MSMEs and enable faster GST and RoDTEP refunds. The industry body said that the Budget should offer time-bound support to sectors hit by tariff shocks.
ASSOCHAM said that the government should reduce power and input costs by expanding incentives for distributed renewable energy uptake by MSMEs and provide targeted credit enhancement for NBFCs lending to MSMEs to reduce borrowing costs.
Budget Expectations 2026 LIVE Updates: Consumer sector expects stable taxation for demand growth
Jasraaj S. Kalra, Managing Director of Noble Group, states that the consumer durables sector anticipates the Union Budget 2026–27 to stimulate consumption through stable taxation and income-led demand measures, while also facilitating scale manufacturing through the localisation of components and electronics.
“ A demand-driven approach supported by strong domestic supply chains will allow Indian manufacturers to expand capacity, improve efficiencies, and reduce import dependence.” Kalra adds.
Budget Expectations 2026 LIVE Updates: ICRA says railways' budget to increase increase in range of 5%
ICRA, a rating agency, says that given the trends seen in the railways allocation in the last 2 years, where the railways budget has seen a 5 per cent YoY growth, a rangebound increase in the allocation for railways in Budget 2026 is likely.
Suprio Banerjee, Vice President & Co-Group Head, ICRA, says that this year the focus will be on railway capacity increase, gauge conversion, new routes, track increase and the launch of a dedicated freight corridors.
“Infrastructure modernisation, including rolling stock upgrades and station redevelopment, alongside safety enhancements, will remain critical. Within capacity expansion, economic corridors, coupled with accelerated deployment of Kavach 4.0 and advanced signalling across the network, are expected to dominate both budgetary priorities and execution strategies,” she adds.
Budget Expectations 2026 LIVE Updates: Fiscal consolidation to continue this year
The industry body ASSOCHAM stated that Budget 2026 is likely to continue the fiscal consolidation trajectory. The government reaffirmed its commitment to reducing the fiscal deficit to 4.4% of GDP in FY 2025–26, down from 4.8% in the previous year.
According to interim data, the fiscal deficit had reached approximately 36.5% of the full-year target by the end of the first half of FY2026, compared with about 29% a year earlier, despite a nearly 40% increase in capital expenditure during the same period.
PHD Chamber of Commerce and Industry says that cost of credit for MSMEs remains relatively high. The industry body has recommended reintroduction of an interest subvention scheme for MSMEs with a 2 per cent interest subsidy on new and incremental loans from banks and NBFCs is proposed.
PHDCC also recommended increase in thePradhan Mantri MUDRA Yojana loan limits to to match credit availability with the current financing needs of the enterprise.
“To cushion MSME exporters amid rising global tariff pressures, we proposed the reintroduction of the Interest Equalization Scheme on pre- and post-shipment export credit. These includes extending eligibility to service exporters, alongside manufacturing exporters, to broaden the export support basket for improving price competitiveness in global markets.”