Anticipated Budget FY26 Focuses on Rural Growth and Capital Efficiency

The Union Budget for FY26, as reported by Yes Bank, aims to prioritize rural development, youth and women empowerment, and refined employment incentives while maintaining fiscal discipline. With a GFD to GDP target of 4.5%, capital expenditure will shift beyond railways and roadways, emphasizing efficiency to boost economic momentum.

The forthcoming Union Budget for FY26 is poised to emphasize rural growth, empowerment for youth and women, and refining the Employment Linked Incentive Scheme, according to insights from Yes Bank. The budget aims to shift capital expenditure focus beyond saturated sectors like railways and roadways while adhering to fiscal discipline aimed at fostering a 'Viksit Bharat.'

With a Gross Fiscal Deficit (GFD) target set at 4.5% of GDP for FY26, down from 4.7% in FY25, the government anticipates net and gross borrowings through G-secs to reach Rs 11.3 trillion and Rs 14.2 trillion respectively. The budget strategy includes restoring investor confidence by enhancing capital expenditure efficiency to minimize project delays and costs.

Faced with underwhelming GDP growth figures—a mere 5.4% in Q2FY25, with a FY25 projection at 6.4%—the budget proposes to maintain its focus on capital expenditures. Addressing weaker urban demand alongside resilient yet inadequate rural consumption, policy discussions include potential adjustments to income tax slabs aimed at boosting consumption, though impacts may be limited.

(With inputs from agencies.)