The Union Budget for 2026-27, to be unveiled on Sunday, is being framed under an unusually heavy cloud of external uncertainty. The global economy is fragmenting, geopolitics is intruding directly into trade and capital flows, and the rules-based order that once offered predictability is steadily eroding. For India, this means the familiar playbook of growth, fiscal management, and external financing can no longer be taken for granted.
Trade is increasingly a theatre of strategic rivalry rather than simple commerce, with tariffs, subsidies, and technology controls deployed as instruments of statecraft. Add volatile energy markets, climate-related disruptions and the risk of financial contagion, and the backdrop for policymaking could scarcely be more challenging. Against this backdrop, the Budget’s primary task is not to chase short-term applause but to reinforce resilience. India cannot fully insulate itself from global shocks, but it can reduce vulnerability.
Fiscal Discipline
That requires resisting fiscal adventurism even as demands for spending intensify. The credibility earned over recent years through gradual consolidation must not be squandered. Markets will scrutinise not just the headline deficit number, but the quality of expenditure and the realism of revenue assumptions. Public capital expenditure will rightly remain the centrepiece of the Budget, having supported demand and helped crowd in private investment.
But that alone cannot carry the burden indefinitely. The next phase must focus on lowering the cost of capital, easing regulatory frictions, and restoring private-sector risk appetite. External uncertainty also sharpens the need to rethink India’s growth drivers. Services exports have provided valuable ballast, but they cannot be the sole engine in a world where technology access, data flows, and visa regimes are increasingly politicised. Manufacturing exports, deeper integration into global value chains, and greater scale in goods production are no longer optional.
Beyond Services
The Budget must therefore align incentives, trade policy, and logistics reforms to make Indian firms globally competitive, not merely protected. A volatile global environment also places a premium on domestic savings and financial stability. The Budget must avoid aggravating structural imbalances through populist measures. Fiscal profligacy, however tempting politically, risks raising borrowing costs for households, firms, and the sovereign alike—precisely when global capital is becoming more selective and risk-averse. At the same time, uncertainty is no excuse for inaction.
If anything, it strengthens the case for difficult reforms. Disinvestment and asset monetisation, sporadically pursued, need renewed urgency. Recycling capital locked in underperforming public assets can fund infrastructure, ease fiscal pressure, and signal seriousness to investors without adding to public debt. Equally important is support for the economy’s shock absorbers—micro, small, and medium enterprises, exporters, and workers. Targeted credit support, faster refunds, simpler compliance, and predictable policy can help smaller firms navigate global turbulence.
The Economic Survey released this week revised India’s potential growth rate upward from 6.5% to 7%—a respectable number. But potential growth means little if the external account remains hostage to global risk aversion and geopolitical fractures. In uncertain times, confidence itself becomes a policy variable. A credible medium-term fiscal path, transparent assumptions, and consistent messaging can anchor expectations even when external conditions deteriorate. This Budget will not have the luxury of optimism. But it does not need pessimism either. What it needs is realism—about the world as it is, the risks India faces, and the reforms required to grow despite them. In an age of global disruption, the strongest signal the Budget can send is that India is prepared—not just to weather uncertainty, but to outgrow it.