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    BUSINESS & TRADE                                                     JANUARY 23, 2026      |  The Indian Eye 30

             India Eyes Strong 2026 Growth Push

                    with Higher Capex, Export Focus

              As India prepares for Union Budget 2026 amid global uncertainty, policymakers are betting on
                capital expenditure, exports and selective reforms to keep growth near the world’s fastest pace

            OUR BUREAU                                                                                            of Baroda expects the RBI to deliver
                                                                                                                  a final 25-basis-point rate cut in FY26,
            New Delhi
                                                                                                                  aimed at nudging growth without
                  s the Indian economy steps into                                                                 stoking inflation. With GDP growth
                 2026, optimism is tempered by                                                                    estimates broadly aligned between
            Acaution. Growth prospects re-                                                                        the government and the central bank,
            main strong by global standards, yet                                                                  major forecast revisions appear un-
            the policy choices ahead reveal a gov-                                                                likely. Instead, liquidity management
            ernment keenly aware that momen-                                                                      through open market operations may
            tum cannot be taken for granted. The                                                                  do the heavy lifting, especially if glob-
            upcoming Union Budget is expected                                                                     al financial conditions tighten.
            to set the tone for this balancing act—                                                                   A separate PLI focused on re-
            ambitious enough to sustain growth,                                                                   search and development is also under
            disciplined enough to reassure mar-                                                                   consideration. Such a move would
            kets, and flexible enough to respond                                                                  signal a shift from assembly-led
            to external shocks.                                                                                   manufacturing to innovation-driven
                                                                                                                  growth. The possible inclusion of
            According to estimates by                                                                             new-age  sectors—artificial  intelli-

            Bank of Baroda economist Son-                                                                         gence, space exploration  and robot-
                                                                                                                  ics—points to an ambition to posi-
            al Badhan, the government is        Union Finance Minister Nirmala Sitharaman with Secretary of Economic Affairs Anuradha   tion India not just as a manufacturing
            likely to target growth of 8.5–9   Thakur during the Pre-Budget meeting with State Finance Ministers, in New Delhi (ANI Photo/  hub, but as a technology and innova-
                                                                                                                  tion ecosystem. If executed well, this
            per cent next year, supported                                Jitender Gupta)                          could also attract higher-quality for-

            by  a  substantial  increase  in      What is notably absent from the   The external sector offers a   eign direct investment.
                                                                                                                      Risks,  however,  remain  ev-
            capital expenditure to around     policy mix is the prospect of major   mixed but encouraging picture. India   er-present. External headwinds—
            `12–12.2 lakh crore. This is      tax cuts. After last year’s income tax   is on track to cross USD 850 billion   from global monetary tightening to
                                              changes and GST 2.0 rationalisa-
                                                                                                                  geopolitical disruptions—could test
                                                                                in total exports in FY26, building
            not just a headline number.       tion, further relief appears unlike-  on last year’s record of USD 824.9   India’s assumptions. Policymakers
                                              ly. Instead, the government seems   billion. Services continue to be the   appear realistic about this uncertain-
                Public capex has become the   inclined to focus on targeted inter-  standout performer, growing at over   ty, emphasizing adaptability rather
            central pillar of India’s post-pandem-  ventions rather than broad-based   6 per cent, while merchandise ex-  than rigid planning. Disinvestment
            ic growth strategy, filling the invest-  giveaways. This signals a shift from   ports have shown resilience despite   and asset monetization, while no
            ment gap left by a cautious private   stimulus-driven policy to one aimed   weak  global trade.  December’s  up-  longer center-stage, are expected to
            sector and laying the groundwork for   at structural strengthening.  tick in goods exports underscores   provide steady, if modest, revenue
            longer-term productivity gains.       In a global environment marked   this quiet resilience.         support, with asset monetization in-
                Fiscal consolidation, however,  by slowing demand, geopolitical ten-  Yet rising imports have widened   creasingly outpacing traditional dis-
            remains part of the narrative. The   sions  and  fragile  supply  chains,  ex-  the trade deficit to nearly USD 97 bil-  investment.
            government is expected to meet its   ports and MSMEs are expected to   lion for the April–December period,   Taken together, India’s econom-
            FY26 fiscal deficit target of 4.4 per   take center stage. The government   up from USD 88 billion a year earli-  ic planning for 2026 reflects a coun-
            cent and lower it further to around   has already reduced customs duty   er. This is not necessarily alarming in   try confident in its fundamentals but
            4–4.1  per  cent  in  FY27.  That  tra-  slabs  and  simplified  compliance.   isolation—capital goods and energy   wary  of  complacency.  The  empha-
            jectory  reflects  a  conscious  attempt   Further rationalisation—particularly   imports often rise alongside growth—  sis on capex, exports, MSMEs and
            to balance growth with credibility.  lower duties on key raw materials—  but it reinforces the need for export   emerging technologies suggests a
            Markets have largely rewarded this   could help improve competitiveness   competitiveness and trade diver-  long-term  vision,  while  fiscal  disci-
            approach, seeing India as one of the   and ease cost pressures. An interest   sification.  More  free  trade  agree-  pline and measured monetary easing
            few major economies capable of pur-  subvention scheme for MSMEs and   ments, correction of inverted duty   underline prudence. The challenge
            suing expansion without abandoning   exporters is also on the cards, reflect-  structures and a steady reduction in   will be execution—ensuring that big
            fiscal  discipline.  The  assumption  of   ing the recognition that smaller firms   average customs duties could play a   numbers translate into broad-based
            nominal GDP growth of around 10   remain vulnerable to both global vol-  critical role in sustaining momentum.  gains. If that balance holds, 2026
            per cent also provides room to man-  atility  and  domestic  financing  con-  Monetary policy is likely to re-  could mark another decisive step in
            age this delicate equation.       straints.                         main supportive but cautious. Bank   India’s growth journey.

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