As Finance Minister Nirmala Sitharaman prepares to present the Union Budget for 2026–27, markets are watching closely for signals on how India plans to balance growth support with fiscal discipline at a time of heightened geopolitical and macroeconomic uncertainty. With uneven global growth, volatile capital flows, and tighter financial conditions clouding the outlook, the country’s relative macro stability has emerged as a key differentiator.
According to domestic brokerage firm Axis Securities, markets are likely to favour a budget that sustains growth without compromising medium-term fiscal consolidation.
India’s real GDP growth is estimated at around 7.4% in FY26, supported by government capital expenditure, resilient services exports, and gradual improvement in private investment sentiment. However, Axis cautioned that moderation in consumption demand and persistent global risks necessitate a carefully calibrated fiscal strategy.
Capex continuity and policy credibility in focus
Axis Securities expects capital expenditure to remain the cornerstone of the government’s growth strategy in Budget 2026–27, with allocations likely in the range of ₹12–13 trillion, implying a 10–15% year-on-year increase. Key focus areas are expected to include roads, railways, logistics infrastructure, defence indigenisation, urban infrastructure, power transmission, and renewable energy.
For global investors, sustained public capex is seen as critical for crowding in private investment and supporting medium-term earnings visibility, particularly in infrastructure-linked sectors.
At the same time, Axis Securities expects the government to continue on its fiscal consolidation roadmap, targeting a fiscal deficit of around 4.2–4.4% of GDP for FY27. Achieving this would signal strong policy credibility to both domestic and global investors.
“One of the key challenges for Budget 2026–27 is balancing capex-led growth with consumption support. Urban consumption has moderated while rural demand remains uneven. The government may support consumption through rural infrastructure and agriculture support, employment and skilling programs, and targeted welfare spending,” said the brokerage.
Structural reforms, revenue levers, and fiscal buffers
Beyond headline numbers, Axis Securities said markets will closely watch signals on ease-of-doing-business reforms, labour and logistics efficiency, digital public infrastructure, and legal and regulatory simplification.
Such reforms, it said, are essential for boosting productivity, attracting long-term foreign capital, and sustaining India’s investment-led growth trajectory.
On the fiscal math, the brokerage expects disinvestment and asset monetisation to play an important role in supporting non-tax revenues, with potential targets of ₹50,000–70,000 crore. While execution has historically lagged, a clearer and time-bound roadmap could be positively received by markets.
Axis also highlighted the role of higher-than-budgeted dividend transfers from the Reserve Bank of India as a key buffer, which could help offset revenue pressures and limit market borrowings without compromising growth expenditure.
With global uncertainty, domestic growth resilience, and fiscal discipline all in play, the brokerage expects budget to strike a balance between growth support and macro stability. For emerging markets like India, the current environment presents both risks and opportunities.
“While volatile global capital flows and currency movements remain a concern, India’s relatively strong growth outlook, large domestic market, and policy stability continue to position it favourably in global asset allocation,” the brokerage further added.
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