Union Budget 2026: Focus on Capex, Fiscal Deficit, and GDP Growth Likely

The Union Budget 2026 will mostly focus on increasing capital expenditure in infrastructure,as per a Mint report. It is also expected to make structural changes in the Indian economy.

As per the news reports, Union Budget will aim at maintaining its consistency as the fourth largest economy of the world, despite the ongoing geopolitical tensions, trade-war and tariff threats from the U.S. The Budget is not likely to bring any transformational reforms. It aims at maintaining its strong position as the fourth largest GDP globally.

The government wants to retain its robust economy, reflected in its performance in FY26, despite the punitive tariff and trade-wars emanating from the U.S. As per the Mint report, the Indian economy benefitted big time in FY26 through positive growth in macroeconomy, cuts in interest rates on debts by 1.25% in total, decreased inflation rate, rationalisation of the GST amount, decrease in income tax rate, and a normal monsoon. Due to this, the GDP rate of the country is estimated to grow 7-7.3%. 

The Union Budget will not bring any further rationalisation in taxes and focus on increasing the fiscal deficit. The government, however, will increase the capital expenditure on the capitals in infrastructure. 

GDP Growth Plans of the Union Budget FY 2026-27

The GDP of India will see a decline, as the brokerage firm highlighted the decrease of GDP TO 6.4% in FY25. This deceleration is the weakest in the last four years. However, the GDP is expected to recover through a growth of 6.5% – 6.8%. The reasons behind this increment is the increased investment by the government, monetary easing and improved demands of the consumers. 

Tax Changes

The last Union Budget had brought major changes in tax reforms, rationalising the income tax slabs. However, this year, the budget will not make any further rationalisation and reforms. The reason behind this is the slower collection of income tax from the individuals and corporate firms than expected in the Budget. The slower income tax has reduced the tax revenues of the government, leading to fiscal deficit. The government is not able to collect enough tax to meet its capitals expenditures, debts, and other operational costs. 

Capital Expenditures (Capex)

As per the report, the FY27 will increase the capital expenditure of India moderately. In FY26, the capex is highlighted to be in target, i.e., the expenditures will not be spread broadly and will focus on certain sectors only. The capex will grow 28% by November but the expenditure will remain moderate in FY26 due to less sectoral plan approvals.

In FY27, the Capex is projected to grow mainly by single-digit. The defense sector might receive a capex of double-digit due to the geopolitical tension with the U.S. India has already approved a defence transformational plan of ₹3.8 lakh crore in CY25 under the review of Defence Acquisition Council.

However, as per the reports, the sectoral capex might increase with government spending on infrastructure, water, and sanitation. Some of the growth plans of these sectors have already been approved under PPP. There will be big economic momentum in the sectors like EPC, railways, and core infrastructure segments. Some sectors, however, projected to see positive activities in FY26 like power, renewables, transmission, and data centres.