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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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