The Finance Minister, Nirmala Sitharaman, will present the Union Budget on February 1, 2026, at 11 am. Given the current shifts in the global economic environment, investors are keen to learn what the upcoming budget will include and its primary areas of focus.
Factors like trade disputes, tariff policies, disruptions in supply chains, and rising geopolitical tensions have shaken the foundational assumptions of globalization that have been in place for many years. According to experts, for economies such as India’s, which are still integrating into global value chains while promoting domestic growth, this period presents both challenges and opportunities.
Talking about the upcoming budget, Mohit Gulati, the CIO and managing partner of ITI Growth Opportunities Fund, believes that with global trade lines hardening and the Trump–Modi friction in the background, budget 2026 cannot afford ambiguity. This has to be a decisive Atmanirbhar budget about strength, scale, and execution.
Gulati added that this is not a populist budget. India has momentum. The job now is to compound it.
5 key things to watch out for this year
Fiscal deficit
The fiscal deficit reflects the government’s net borrowing needs for that year and is a crucial indicator of fiscal health. A reduced figure signifies improved management, as demonstrated by the FY25 result of 4.8% and the planned reduction for FY26.
For FY 2025-26, the target was established at 4.4%, aiming to decrease debt and promote growth.
According to a recent report by Motilal Oswal Financial Services on the Union Budget, it anticipates that the FY27 Union Budget will represent a significant turning point in India’s fiscal structure, with the gross fiscal deficit set at 4.3% of GDP, lower than the 4.4% targeted for FY26.
GDP growth target
Investors in the financial markets will closely watch the GDP growth target for FY27. In relation to the Union Budget for FY2026, India’s real GDP growth prediction was set at 7.4% for FY 2025–26, up from 6.5% in FY 2024–25.
As per the brokerage firm Motilal Oswal Financial Services for FY27, the budget is likely to be grounded in a nominal GDP growth projection of approximately 10.1%, providing some leeway to uphold fiscal discipline while fostering growth.
Capital Expenditure (Capex)
The government’s capital expenditure (Capex) in India’s Union Budget emphasizes the creation of long-term assets such as infrastructure—roads, railways, and energy sources—to stimulate economic growth. Recent budgets have shown considerable increases, with a notable allocation of ₹11.21 lakh crore (3.1% of GDP) for FY2025-26.
According to a report by Motilal Oswal, the projected total expenditure is expected to rise by 7.0% year-on-year in FY27, reaching ₹52.9 trillion (or 13.4% of GDP).
Further, Mohit Gulati highlighted that it was time to unlock private capex. Gulati explained that public capex has carried growth. The next leg depends on crowding in private capital through policy certainty, faster clearances, and risk-sharing.
Atmanirbhar Bharat
According to Mohit Gulati, Atmanirbhar Bharat must mean scale. Gulati emphasized that the government should focus on defence, semiconductors, electronics, energy, real domestic capacity, not pilot projects or policy headlines.
Analysts propose that emphasizing ‘Atmanirbharta’ in defence, along with integrating modern technologies such as artificial intelligence, extends beyond just enhancing current systems.
Experts contend that increasing the defence budget should be regarded not just as a monetary choice, but as an essential strategic requirement.
Personal Income Tax Slabs
All taxpayers, whether individuals or corporations, are eager to learn about the tax reductions or impositions that the Finance Minister will outline in the Budget. However, experts believe that no changes will take place in the tax system.
In the 2025 Budget, acknowledging the crucial role of the middle class in national development, the Finance Minister granted significant tax relief to individual taxpayers under the streamlined tax framework. For individuals earning up to ₹12 lakh in total income, there is no tax liability. This threshold was previously set at ₹7 lakhs. Additionally, the income brackets were adjusted, with the maximum tax rate of 30% now applying to income exceeding ₹24 lakhs, a limit that was formerly capped at ₹15 lakhs.
Experts believe that the streamlining of GST has reinstated consumer trust, as reflected in the data concerning demand.
According to Mohit Gulati, the government should maintain this momentum and avoid policy flip-flops. Make the top of India open purse strings now.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
