It’s that time of the year again. Along with the anticipation about a new year, there are also expectations about the Budget for the new financial year. This has been an interesting year for India. While the GDP surged above 8%, inflation slipped to record lows and GST, income tax added momentum to consumption, the global headwinds have been a source of concern. What’s the big expectation from the Budget in this backdrop? Fiscal consolidation, lower debt-GDP ratio and consumption continue to be focus areas, but ‘yeh dil mange more.’ How will the key financial blueprint create avenues for resource mobilisation and offer impetus to trade?
Here are some of the key expectations from the Budget against a backdrop of persistent geopolitical tension and volatile financial markets, signalling the risk of a moderation in growth.
Fiscal consolidation- Walking the tight rope
The fiscal deficit for 8 months in 2025 between April-October is at 4% of GDP Vs the budget estimate of 4.4% for the full year. The deficit is currently at 52.6% of the total budgeted deficit for FY26. This is one of the lowest levels since 2011, excluding the pandemic years- FY21, FY22. According to a Goldman Sachs report, the Government is expected to meet its fiscal deficit target for FY26. The international brokerage firm also indicated that the Government may look at offsetting the potential shortfalls in income tax and GST collections by cutting back on capital expenditure.
The report highlighted that central government capex contracted sharply in October, declining by around 28 per cent year-on-year. This fall was mainly due to lower capex transfers to states, even as defence capex continued to remain strong.
The report stated that these trends reinforce the expectation that expenditure rationalisation, particularly of capex, will play a key role in keeping the fiscal deficit within the targeted 4.4% of GDP for FY26. Under the Fiscal Responsibility and Budget Management Act, 2003, the Centre’s deficit needs to converge to 3% of the GDP and the debt to-GDP ratio to around 40% by FY31. The street is looking forward to targeted measures towards that end that could help accelerate the journey.
Make in India push and march towards Viksit Bharat 2047
In the journey towards that end, the government is also expected to reinforce its flagship initiatives, such as Make in India, Aatmanirbhar Bharat and the long-term vision of Viksit Bharat 2047, through targeted fiscal and policy interventions. In a bid towards that experts expect the Govt to prioritise high-quality capital expenditure in logistics, renewable energy, and industrial corridors to boost productivity. Expanding the state participation in national infrastructure pipelines and improving infrastructure project execution with time-bound clearances are the other expectations ahead of the Budget.
Ease of Doing Business a priority in Budget wishlist
Businesses, especially incentives for MSMEs, are a focus area in the tough geopolitical conditions that India is currently operating in. In this context the ease of doing business takes centre stage. Key business organisations like Assocham have called for the Govt to “strengthen single-window clearances and reduce procedural frictions—especially in land, labour, and local taxation.”
The industry is also looking for improvement in liquidity stability via diversified funding, lower regulatory bottlenecks for small-ticket MSME lending and improve fiscal predictability. Encouraging stable FDI flows is also something that sits pretty high on the expectations chart.
MSME- Tackling tariffs
One of the key concerns in the face of rising global protectionism and the tariff trauma unleashed by the US and now Mexico too, the uncertainties for exporters are increasing. While the direct impact on GDP can be minimised, the spillover on MSMEs need to be taken into account, especially the jobs in these organisations. The MSMEs contribute over 30% to the GDP and are responsible for about 45% of exports that India records. These organisations are also responsible for creation close to 300 million jobs. As tightening tariffs pose risks to their profitability, the industry is waiting with bated breath as to what the Govt would announce to mitigate some of the challenges.
Secure critical minerals access
Just two quarters ago, China’s sudden export curbs on critical minerals brought global supply chains to their knees. India’s reliance on imported oil and gas and critical minerals amplifies exposure to global price shocks and supply interruptions. This is exactly where India’s Critical Mineral mission takes up a key role as the country takes long strides towards self-sufficiency. The Ministry of Heavy Industries (MHI) recently notified the Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnet. The scheme aims to create a 6,000 metric tonne per annum domestic manufacturing capacity. Steps ensuring secure critical minerals and ensure access to alternative energy supplies are key factors to watch.
Consumption boost – Maintaining momentum
The great Indian consumption story is expected to continue to stay on the radar. Along with the income tax cuts and the new GST rates, monetary easing and lower food inflation, the overall discretionary spending across households is set to increase. According to Deloitte’s wishlist ahead of the Budget, “This renewed momentum in household demand will likely reinforce domestic consumption as a key driver of growth in FY26”.
Resource mobilisation- What’s the plan
The Government also needs to look at out of the box avenues to generate resources. With the GST rates lowered, revenue inflow is also a key monitorable. Policies that allow the Government to generate resources is something that the industry will be watching out for. There are also expectations that Budget may give some kind of indication about potential divestment plans and expedite strategic divestment in key areas including state-owned banks.
All in all, the forthcoming Budget is expected to continue with the steps targeted towards boosting consumption, promoting manufacturing and Government’s commitment towards a clear fiscal consolidation roadmap with defined deficit targets. Simplifying FDI norms, accelerating digital and infrastructure push are the other key expectations ahead of Budget 2026.
