Mumbai (Maharashtra) [India], January 23 : The Union Budget FY26 is expected to reflect the Centre's commitment to fiscal consolidation, with the fiscal deficit projected at 4.5 per cent of GDP, according to CareEdge Ratings.
Sachin Gupta, Chief Rating Officer, CareEdge Ratings, stated, "The budget is likely to focus on supporting consumption, boost manufacturing competitiveness to support job creation and tap the demographic potential, emphasis on agriculture via higher allocation for agri r&d, farmers' welfare and policy reforms, continued capex emphasis to close india's infrastructure gap in areas like power, and transportation, and fiscal discipline with focus on reducing the debt-to-gdp ratio."
Gross tax revenue is projected to grow by 10.4 per cent in FY26, marginally higher than the expected nominal GDP growth of 10.3 per cent.
However, direct tax collections might face headwinds due to anticipated tax relief, while corporate tax collections are set to improve with economic recovery.
GST collections are forecasted to grow at a healthy rate of 11 per cent in FY25 and 11.4 per cent in FY26. Excise duty collections are expected to remain subdued following the reduction of the Special Additional Excise Duty on domestically produced crude oil.
Meanwhile, recent increases in customs duty on edible oil and anticipated reversals of gold customs duty cuts are likely to bolster revenue from customs duty.
Capex is projected to rise by 19.8 per cent to Rs11.5 trillion in FY26, following a relatively weak performance in FY25, where it is expected to fall short by Rs1.5 trillion of the budgeted target.
The quality of expenditure is set to improve, with the capex-to-revenue expenditure ratio increasing to 0.30 in FY26.
The fertiliser industry expects an allocation of Rs1.75 lakh crore for subsidies in FY26. Reducing import duties on phosphoric acid and rock phosphate and promoting organic fertiliser production are anticipated reforms.
Emphasis on electric vehicle (EV) adoption continues, with expectations for incentives to expand EV charging infrastructure and uniform GST rates on EV batteries. The sector seeks tax incentives for hybrid vehicles and revisions in the Production Linked Incentive (PLI) scheme to accommodate smaller players.
Banking and NBFCs expect measures to incentivize deposit inflows, credit flow to MSMEs, and affordable housing finance. Increased allocations for PMAY and reforms to support mid-sized MFIs are key demands. The insurance sector seeks capital infusion for public insurers, GST reductions on policies, and faster resolution under the Insolvency and Bankruptcy Code (IBC).
The hotel and tourism industry anticipates infrastructure status, increased investments, tax breaks, and incentives for sustainable tourism. Rationalization of taxes across hotel categories is a priority.
With robust growth in FY24, the pharmaceutical sector expects a healthcare budget increase of 2.5 per cent-3 per cent, reintroduction of tax benefits for R&D, and enhancements to the PLI scheme. Lower customs duties on life-saving drugs and higher health insurance premium deductions are also expected.
With gross borrowing projected to rise to Rs14.3-14.8 trillion in FY26 due to higher redemptions, the Centre's approach will be critical in maintaining fiscal health while driving developmental goals.
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