FY26 Budget: Boosting Growth Amid Fiscal Prudence

The FY26 Budget aims to drive economic growth by increasing capital expenditure by 20%, boosting domestic demand through higher disposable incomes, and maintaining fiscal discipline with a deficit target of 4.4% of GDP. Strategic reforms are essential for achieving long-term economic goals.

Anticipation surrounds the FY26 Budget, expected to project a significant 20% hike in capital expenditure, according to a report by EY. The increased spending aims to stimulate economic activity, enhance personal disposable income, and target a fiscal deficit of 4.4% of GDP by March 2026.

DK Srivastava, EY India's Chief Policy Advisor, emphasizes that domestic demand drivers will be key to sustaining growth amid global uncertainties. The budget is expected to reinvigorate growth in the government's capital expenditure, alongside tax rate adjustments and deductions to boost disposable incomes among lower and middle-income groups.

While balancing fiscal prudence with growth initiatives, the budget will focus on expanding urban consumer spending and revitalizing capital investments. The EY Economy Watch January 2025 report predicts a continued fiscal deficit reduction, facilitating sustained economic growth while adhering to fiscal discipline.

(With inputs from agencies.)