Budget 2026-27: Nirmala Sitharaman to Unveil Economic Roadmap for India
Union Finance Minister Nirmala Sitharaman is poised to present the highly anticipated Budget 2026-27 before both houses of the Union Parliament on Sunday, 1 February 2026. The landmark financial announcement, scheduled to commence at 11 am IST, will address the Lok Sabha, Rajya Sabha, and the nation at large, setting the economic trajectory for the upcoming financial year.
Top 10 Key Expectations from Budget 2026
As stakeholders across sectors await the Finance Minister's speech, several critical areas are under scrutiny. Here are the ten pivotal aspects to monitor:
- LTCG Tax Threshold Revisions: Taxpayers anticipate an increase in the long-term capital gains (LTCG) tax threshold and an expansion of the Section 87A rebate under the new tax regime. The Association of Mutual Funds in India (AMFI) has advocated for allowing this rebate if total income, including capital gains, remains below ₹12 lakh, offering relief to the middle class. Currently, the ₹60,000 exemption under the new policy is considered insufficient for long-term investors, with experts like Mihir Tanna of SK Patodia & Associate LLP noting that the ₹1.25 lakh exemption for equity-based mutual fund units sold after 5-7 years is too low.
- Standard Deduction Enhancement: Expectations are high for a hike in the standard deduction from the existing ₹75,000 to ₹1 lakh under the new tax regime. This adjustment could elevate the tax-free income threshold to ₹13 lakh, mitigating rising living costs. Pranav Koomar, CEO of PlusCash, emphasizes that such a move would alleviate cash-flow pressures by rationalizing TDS provisions.
- Fiscal Deficit Management: Despite lower tax revenues, the government is projected to meet its fiscal deficit target, with a focus on maintaining a 4.4% deficit. Sumit Singhania of Deloitte India highlights the government's commitment to fiscal prudence amid geopolitical challenges, which continue to influence economic policies.
- GDP Growth Projections: The Indian economy is forecasted to grow between 6.8% and 7.2% in FY27, supported by robust macro fundamentals and regulatory reforms. However, concerns persist over a nominal growth rate of 8%, down from 10.1% in 2025-26. Additionally, India will transition to a new base year of 2022-23, replacing 2011-12, to better reflect structural economic changes.
- Borrowing and Debt Focus: Budget 2026-27 will scrutinize borrowing strategies, as a higher fiscal deficit may increase financial year borrowings. Central government debt is estimated at 55% of GDP for 2025-26, rising to 85.23% when state borrowings are included, underscoring the need for prudent fiscal management.
- Private Sector Investment Boost: Experts anticipate tax relief, enhanced ease of doing business, and sustained public investment to foster a conducive environment for private sector participation. Amit Gupta of Saraf and Partners notes that while these measures promote growth, challenges like global uncertainties and currency pressures require strategic navigation.
- Deregulation Initiatives: The budget is expected to emphasize deregulation through tax cuts to stimulate demand and improve business ease. N. ArunaGiri, CEO of TrustLine Holdings, predicts that reform momentum will accelerate, making deregulation a central theme, even if large giveaways are limited.
- Capital Expenditure (Capex) Increase: A rise in capital expenditure is anticipated, with capex as a percentage of GDP having grown from 2.5% to 3.1% between 2021-22 and 2025-26. This reflects the government's commitment to infrastructure development and fiscal responsibility.
- Tax Revenue Strategies: With tax revenues estimated to fall short by ₹3 trillion in 2025-26 due to GST rate cuts and income tax benefits, focus shifts to innovative methods for expanding the tax base and improving collections. The Finance Minister's approach to addressing this shortfall will be closely watched.
- Divestment Plans: The government's divestment agenda remains a key area, as non-tax revenues from asset sales have been inconsistent. Despite intentions, execution gaps persist, and stakeholders will monitor whether Budget 2026-27 outlines concrete plans to revitalize divestment efforts.
As Nirmala Sitharaman takes the podium, her budget speech will not only outline fiscal policies but also signal India's economic direction amidst global and domestic challenges. The emphasis on tax reforms, infrastructure investment, and private sector engagement underscores a comprehensive approach to sustaining growth and stability in the coming year.
