Budget 2026 emphasises growth via job creation, policy continuity

Budget 2026 focuses on job creation, capex-led growth, manufacturing depth and policy continuity, while maintaining fiscal discipline and long-term earnings visibility, writes Anand Shah

The Union Budget 2026–27 reinforces the Government's medium-term growth strategy by prioritising job creation (both in manufacturing and services) through public capital expenditure, manufacturing ecosystem development, MSME formalisation, and services exports, while maintaining a fiscal consolidation path. The approach consciously avoids near-term populism and instead prioritises balance sheet resilience and long-term capacity creation. From an investment perspective, the policy mix supports multi-year earnings visibility for companies linked to capex, manufacturing value chains, logistics, financial intermediation and select services. Consumption recovery is likely to remain earnings-driven rather than stimulus-led. 

On the macro front, fiscal discipline remains intact. Nominal GDP for FY27 is pegged at ₹393 trillion, implying 10 per cent growth. Total expenditure is budgeted at ₹53.47 trillion, up 7.6 per cent year-on-year, while capital expenditure rises to ₹12.22 trillion, growing 9 per cent. Effective capital expenditure, including grants for asset creation, increases sharply to ₹17.15 trillion, up 22 per cent over FY26 RE. 

The fiscal deficit is budgeted at 4.3 per cent of GDP versus 4.4 per cent in FY26 RE, with a continued medium-term goal of lowering debt-to-GDP toward 50 per cent by 2030.  ALSO READ | Budget 2026-27: Sound math fails to meet soaring market expectations 

Manufacturing and industrial capacity building form the core structural push. The emphasis has shifted from assembly-led expansion to deeper ecosystem creation. Key measures include ₹10,000 crore over five years for the Biopharma SHAKTI programme, expansion of the Electronics Components Manufacturing Scheme outlay to ₹40,000 crore, and a ₹10,000 crore container manufacturing scheme. A ₹20,000 crore allocation for carbon capture, utilisation and storage, development of three chemical parks, promotion of rare earth corridors in mineral-rich states, and revival of 200 legacy industrial clusters signal a broad-based push toward import substitution and value-chain depth. This may benefit capital goods, specialty chemicals, industrial services and logistics. 

Infrastructure spending remains a priority, with greater focus on project quality and risk-sharing. The proposed Infrastructure Risk Guarantee Fund, offering partial credit guarantees during development and construction phases, can improve project bankability and private participation. Additional announcements include a new freight corridor between Dankuni and Surat, operationalisation of 20 national waterways over five years, accelerated CPSE real estate monetisation through REITs, and seven high-speed rail corridors connecting major economic hubs. These measures support logistics efficiency, asset recycling and infrastructure financing. 

Services-sector measures carry medium-term earnings implications. For IT and digital services, the safe harbour threshold has been raised and a uniform 15.5 per cent margin prescribed, reducing compliance uncertainty. Tax holidays until 2047 for foreign cloud providers serving global customers through India-based data centres could catalyse sustained investment in digital infrastructure, benefiting power, transmission, cooling, backup solutions and data centre operators. Beyond IT, five medical value tourism hubs, training of 1.5 lakh caregivers and a National Institute of Hospitality aim to strengthen healthcare and tourism services. The “orange economy” push, including AVGC labs in schools and colleges, targets job creation in creative industries.  ALSO READ | What does Budget 2026 have for common man & what more could have been done? 

In financial markets, steps to deepen capital formation include a market-making framework and total return swaps for corporate bonds, incentives for municipal bond issuance and a review of FEMA non-debt rules to ease foreign flows. Higher securities transaction tax on derivatives appears aimed at improving market quality and curbing excessive speculative volumes rather than revenue maximisation. 

Agriculture and rural measures are targeted toward productivity and value addition, including reservoir development, fisheries value chains, livestock entrepreneurship and promotion of high-value crops. 

With policy direction stable and growth normalising, market outcomes are likely to be increasingly company-specific. Businesses with durable earnings, strong balance sheets, pricing power and execution capability should be better positioned as fundamentals regain primacy over broad themes. 

================

Disclaimer: Anand Shah, CIO - PMS & AIF, ICICI Prudential AMC. Views expressed are his own.