Fiscal Deficit Control
The fiscal deficit is a key area of focus, with expectations that the government may aim to cap it at 4.3%. ICRA suggests a push for medium-term debt consolidation.
This means the government will likely prioritize managing its debt levels to ensure fiscal stability. This approach aims to demonstrate responsible financial management to investors and credit rating agencies, which is crucial for maintaining economic confidence and attracting foreign investment. Such measures can also lead to more sustainable economic growth, minimizing the risk of inflation and other economic challenges.
Real Estate Hopes
The real estate industry is looking forward to tax relief and stable policies in the upcoming budget. Gurugram, for instance, attracted a substantial investment of Rs 86,588 crore in real estate in 2025, which underscores the sector's potential. The industry is seeking measures to enhance affordability and boost overall growth. Clear and predictable policies are essential for developers and investors, ensuring a stable environment for long-term investments. This sector also anticipates measures that will support infrastructure development, creating jobs, and stimulating economic activity.
MSME Support Focus
Deloitte highlights the need for Budget 2026 to support Micro, Small, and Medium Enterprises (MSMEs). This support could be in the form of tax incentives, easier access to credit, and measures to promote innovation and technology adoption. Strengthening the MSME sector is vital for job creation, economic diversification, and inclusive growth. Government initiatives aimed at simplifying regulations, reducing compliance burdens, and providing financial assistance can significantly improve MSMEs' competitiveness. Such measures are particularly important to foster resilience against global economic challenges.
Tax Regime Changes
Experts are weighing in on how the new tax regime can be made more attractive. The government is expected to consider strategies to simplify tax compliance and offer more benefits to taxpayers under the new tax framework. One of the discussed possibilities is joint tax filing for married couples. The aim is to create a more efficient and user-friendly tax system. These measures could also involve clarity in tax rules and faster dispute resolution mechanisms, which can reduce tax-related uncertainties and encourage compliance. The goal is to provide benefits for a wide range of taxpayers.
Economic Growth Forecasts
Moody’s anticipates India's economy to grow at 7.3% in fiscal year 2026. Moreover, the IMF has upgraded India's growth forecast to 7.3% for 2025. These optimistic projections are a result of increasing domestic consumption, government spending, and growing investment. These forecasts also reflect confidence in the country's economic management and its ability to navigate global trade and tariff tensions. Consistent economic growth is expected to propel India towards becoming an upper middle-income country by 2030 and achieving a $5-trillion economy in two years, according to SBI Research.
Sector-Specific Reforms
Morgan Stanley suggests key reforms are needed across various sectors, including auto, telecom, railways, and defense. These reforms could involve policy changes to promote investment, improve infrastructure, and boost overall competitiveness. Government investment in these sectors is seen as a catalyst for economic growth and job creation. Streamlining regulations, promoting innovation, and adopting new technologies can all help accelerate growth in these key areas. These strategic measures will play a crucial role in shaping India's economic growth trajectory.
Digital Payments Surge
The DIGIDHAN mission is driving significant growth in digital payments, with a 41% Compound Annual Growth Rate (CAGR). Digital payments reached Rs 22,831 crore in fiscal year 2025. This growth is driven by increasing digital literacy, supportive government policies, and the convenience of digital transactions. This shift towards digital payments also supports financial inclusion by making it easier for a broader population to access financial services. It enhances transparency and reduces transaction costs, while fostering innovation in the financial technology sector.
Market Sentiment Stable
Real estate sentiment is stabilizing in the fourth quarter of 2025. Office demand and favorable funding outlook contribute to the positive sentiment. Capital inflows into India's real estate sector have surged by 25% to a record $14.3 billion in 2025, according to CBRE. This surge indicates strong investor confidence and the sector's growth potential. Factors contributing to this include urbanization, infrastructure development, and growing consumer demand. Increased investment supports construction activities and generates employment opportunities, boosting the overall economy.
Trading and Stock Market
The Budget 2026 is scheduled for February 1, with both the BSE and NSE set to remain open for live stock trading on the day, enabling active market participation. Market movements in the recent past, such as the decline in the Sensex and Nifty, have prompted discussions on factors driving these changes. Additionally, the performance of the IPO market, such as the Bharat Coking Coal IPO, draws considerable attention from investors. Analyzing the factors that influence stock prices and market dynamics helps investors in informed decision-making.
Key Takeaways
Budget 2026 is expected to focus on fiscal prudence, industry-specific incentives, and broad-based economic growth. A balanced approach to financial management is expected, along with initiatives to support key sectors like real estate and MSMEs. Tax reforms, digital payments expansion, and infrastructure development are also high on the agenda. These initiatives align with the broader goals of achieving sustainable economic growth, fostering job creation, and ensuring financial stability. Success will hinge on effective policy implementation and adaptability to evolving global conditions.
