Aamir Ahmad Teeli, Sanjeev Jain & Vipin Sharma
In the absence of any vision document (e.g., 5 Year Plan) put out by the government, the annual budget is expected to provide direction to the country for achieving short term priorities of the government and policy makers. Good thing is that annual planning is yielding its fruits in terms of higher levels of growth, India’s economy rose from being the 10th largest in the world to becoming the fifth largest in the last nine years. This direction becomes more important when the economy is surrounded by global uncertainties and economically depressed neighbouring economies (Bangladesh, Sri Lanka, & Pakistan). Amidst such economic environment, budget for financial year 2026-27 was presented by Finance Minister in the Parliament on 1st Feb. Every section of the country (Lower class, middle class, and upper class) keeps an eye on the budget every year with an expectation that there will be something advantageous in the budget for them. The budget was expected to be accompanied with some major policies to give the economy stability and prevent it from uncertainties (Global & neighbouring) and boost the domestic aggregate demand and economic growth.
The Union Budget 2026–27 outlines a significant expansion in government spending with total expenditure estimated at ₹53.47 lakh crore, reflecting the Centre’s continued focus on growth and public investment. Of this, capital expenditure has been raised to ₹12.22 lakh crore, while effective capital expenditure stands at ₹17.14 lakh crore with a 10% increase, underlining the government’s emphasis on infrastructure creation and asset-building to crowd in private investment and strengthen medium-term growth prospects. Similarly prioritizing national safety, expenditure on defense witnessed a hike of around 20%. On the fiscal front, the Budget maintains a calibrated consolidation path, with the fiscal deficit pegged at ₹16.96 lakh crore, or 4.3% of GDP, down from earlier years despite higher spending. Revenue receipts are projected at ₹35.33 lakh crore, with net tax revenue contributing ₹28.67 lakh crore. Government of India has accepted the recommendations of the 16th Finance Commission to retain the vertical share of tax devolution to states at 41% for the five-year period beginning April 1, 2026, and lasting until 2031. However total transfers to States for year 2026 have been increased to ₹25.44 lakh crore, reinforcing cooperative federalism and supporting sub national development priorities.
“The Budget focuses on long-term stability by investing heavily in infrastructure (Capital Expenditure) and simplifying taxes. The goal is to encourage private companies to spend more, creating a “crownding-in” effect that fuels the Viksit Bharat 2027 vision.”
Keeping in view the upcoming elections in the southern states (Karela, Tamil Nadu, Puducherry) , the Budget has introduced focused and region-specific policies aimed at promoting southern agricultural goods and allied activities, particularly coconut, cashew, and fisheries. These measures are designed to boost and support production through enhanced investment, improved infrastructure, value addition, and better market access, thereby strengthening rural livelihoods and accelerating the overall growth of the regional agrarian economy.
Budget 2026–27 places strong emphasis on simplifying and rationalizing the taxation system to make it more transparent and taxpayer-friendly, with the objective of enhancing tax compliance and boosting tax revenues in the country. This approach is also expected to reduce procedural complexities, curb tax evasion, and create a more conducive environment for economic growth and formalization of the economy.
Overall, the Union Budget 2026–27 strikes a careful balance between long-term growth promotion and fiscal discipline, with a strong emphasis on capital-led expenditure, tax rationalisation, and appreciable transfers to states to sustain economic momentum and cooperative federalism. By prioritising infrastructure investment, simplifying taxation to widen the base, supporting key sectors such as agriculture and allied activities, and gradually containing the fiscal deficit at 4.3% of GDP, the Budget signals a long term sustainable growth achievement approach that seeks to stimulate private investment, generate employment, and ensure macroeconomic stability keeping in view the goal of Viksit Bharat 2027. Higher capital expenditure can crowd in private investment thereby prove more fruitful in the direction of achieving sustainable growth in the future. The expectations are bright from the point of view of policy makers yet many sectors have been left unattended as such Inequality, not much benefit for poor, unemployment and many more.
(Aamir Ahmad Teli is Assistant Professor, Apex Institute of Management, Chandigarh University (CU) Punjab, Sanjeev Jain Senior Director, Apex Institute of Management, Chandigarh University Punjab and Vipin Sharma India Associate Professor and Head BBA Apex Institute of Management, Chandigarh University (CU) in Punjab. The views, opinions and conclusions expressed in this article are those of the author and aren’t necessarily in accord with the views of “Kashmir Horizon”)
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