The Union Budget for FY26, presented amidst a challenging global and domestic macroeconomic landscape, aims to balance fiscal prudence with economic growth. While concerns persist over slowing urban consumption, weak job growth, and cautious private sector investments, India’s macroeconomic fundamentals remain robust.
Finance Minister Nirmala Sitharaman has prioritized fiscal discipline, revising the FY25 fiscal deficit target lower to 4.8% of GDP and setting a further reduced target of 4.4% for FY26. This move signals post-pandemic fiscal consolidation, enhancing India’s credibility among global investors and strengthening its case for a sovereign credit rating upgrade.

Key Highlights of the Budget
✅ Fiscal Discipline & Growth Balance:
- Fiscal deficit target lowered to 4.4% in FY26, compared to 4.6% in FY20 (pre-pandemic).
- Revenue deficit reduced to 1.5% of GDP, indicating better financial management.
- A controlled revenue spending growth of 3.2%, ensuring inflation remains in check.
✅ Boost to Consumption & Real Estate:
- ₹1 trillion worth of personal income tax relief to stimulate urban spending.
- Increased tax benefits for homebuyers—allowing two self-occupied properties instead of one—expected to boost the real estate sector.
✅ Capex & Infrastructure Investment:
- Capex-to-revenue-expenditure ratio at a 20-year high of 28.4%, signaling quality spending.
- FY26 capex allocation maintained at 3.1% of GDP, ensuring continuity in infrastructure projects.
- Highest-ever ₹1.72 trillion capex disbursal in December 2024, showing momentum in infrastructure investment.
✅ Support for Industry & MSMEs:
- Revised classification thresholds for MSMEs to expand their benefits.
- Creation of National Manufacturing & Export Promotion Missions.
- Focus on labour-intensive industries—agriculture, leather, toys, tourism, and hospitality.
✅ Structural Reforms & Business Climate:
- Next-generation Ease of Doing Business measures to boost investments.
- Tax system simplifications & decriminalization of minor infractions.
- ‘Light-touch’ regulatory framework for non-financial sectors to encourage innovation.
Long-Term Fiscal Strategy: A Work in Progress
While the budget addresses short-term fiscal discipline, the long-term roadmap for fiscal policy remains less defined. The government plans to shift to a debt-targeting framework from FY27, aiming to reduce central government debt to 49%-51% of GDP by FY31.
Conclusion: A Prudent Yet Growth-Oriented Budget
The FY26 Union Budget effectively balances fiscal consolidation with economic support, keeping India on a stable growth trajectory. With stronger fiscal discipline, targeted consumption incentives, and strategic infrastructure spending, it ticks most of the right boxes—but the success of its execution will determine its true impact.

Author: This news is edited by: Abhishek Verma, (Editor, CANON TIMES)
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