The Central Government should keep its fiscal powder dry by avoiding any fiscal missteps, while keeping a close watch on changing global trade and economic order
Download ReportQuantEco Research || India FY26 Union Budget preview - Delivering Macroeconomic Stability amidst Global Turbulence
The focus of the upcoming Budget should be to offer domestic macroeconomic stability – by supporting growth, curbing inflationary impulses while strictly adhering to the promised path of fiscal consolidation. Further, this Budget should continue to push forward the newly announced schemes such as Employment Linked Incentive (ELI), PMAY urban 2.0 and expansion of PLI scheme to labour incentive sectors among others should assume importance. Capex support to GDP growth will be warranted in FY26. Amidst the expected shortfall in capex spends (of Rs. 500 bn, assuming equity infusion in BSNL goes through before Mar-25), next year capex growth should be comparable to FY25 at ~10%, as per our view. While lower than post-COVID pace of expansion, nevertheless in absolute terms, it translates into a sizeable incremental support given that the central government’s capex spends have increased more than threefold between FY21 and FY25. In addition, some marginal support to the cohort of income taxpayers via rejig of tax slabs/minor tinkering of rates can be offered, to aid disposable incomes especially among urban consumers. In the same spirit, ELI scheme could see higher allocation of Rs 350-400 bn, in a bid to create formal jobs. Overall, we think that the Central Government should keep its fiscal powder dry by avoiding any fiscal missteps, while keeping a close watch on changing global trade and economic order – which, if deteriorates, may warrant some fiscal support.