'Budget 2026 prioritises sustainable growth over short-term stimulus'

The Union Budget 2026–27 is presented at a time when India stands out as one of the world’s fastest-growing large economies, supported by domestic demand, structural reforms, and disciplined public finances. This is the FM’s ninth consecutive full Budget, a milestone that underscores policy continuity and institutional stability, factors that are particularly relevant for capital markets and long-term investors.  This Budget should be viewed not through the lens of immediate market reactions, but through its contribution to long-term economic capacity building, which ultimately shapes corporate earnings, household savings, and investor confidence.

 

The policy framework of Budget 2026–27 is anchored in a relatively stable macroeconomic environment. The Economic Survey 2025–26 projects India’s real gross domestic product (GDP) growth in the 6.8 per cent to 7.2 per cent range for FY27, driven largely by domestic consumption, healthier balance sheets, and sustained public investment.  Also Read: 'Budget 2026 puts manufacturing, technology at centre of growth push  Equally important is the continued commitment to fiscal consolidation. The fiscal deficit for FY27 is budgeted at 4.3 per cent of GDP, with the Centre’s debt-to-GDP ratio declining toward 55.6 per cent, signalling adherence to the medium-term fiscal glide path even as capital spending expands. For financial markets, such discipline helps anchor inflation expectations, interest rate stability, and sovereign credibility.

Infrastructure as the backbone of long-term growth

A defining feature of this Budget is the allocation of ₹12.2 trillion toward capital expenditure, reaffirming infrastructure-led growth as a central policy pillar.  Key initiatives include:

• Seven high-speed rail corridors connecting major economic centers such as Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Chennai–Bengaluru, Delhi–Varanasi, and Varanasi–Siliguri.
• Expansion of Dedicated Freight Corridors and operationalization of 20 new National Waterways over five years to reduce logistics costs and improve supply chain efficiency.
• Introduction of an Infrastructure Risk Guarantee Fund to improve credit flow and risk-sharing for large projects. 

For long-term investors, such investments enhance productivity across sectors like manufacturing, services, logistics, and urban development thereby creating conditions for sustainable growth rather than short-term stimulus.

Manufacturing, MSMEs, and future-ready sectors:

The Budget’s manufacturing strategy reflects a calibrated shift toward depth, scale, and strategic self-reliance. Interventions across seven strategic and frontier sectors include:

• Biopharma SHAKTI with an outlay of ₹10,000 crore to position India as a global hub for biologics and biosimilars. 
• India Semiconductor Mission 2.0 and an expanded Electronics Components Manufacturing Scheme with outlay raised to ₹40,000 crore. 
• Dedicated rare earth corridors, chemical parks, container manufacturing, and textile ecosystem strengthening to address both traditional and emerging industrial needs.

Support for MSMEs is equally notable, with the creation of a ₹10,000 crore SME Growth Fund, rejuvenation of 200 legacy industrial clusters, and enhanced liquidity through TReDS platforms. These measures aim to nurture “champion MSMEs,” which are critical for employment and export-led growth.

Human capital and healthcare: Investing beyond balance sheets

The Budget recognises that economic resilience ultimately depends on human capital. Healthcare and skilling initiatives include:

• Establishment of five regional medical hubs and expansion of medical education and allied health capacities.
• Training of 1.5 lakh caregivers and addition of 1 lakh allied health professionals, supporting healthcare access and employment generation. 

These initiatives not only strengthen social infrastructure, but also create long-term opportunities in healthcare services, pharmaceuticals, and medical tourism.

Implications for capital markets and investors

For the mutual fund industry, Budget 2026–27 is relevant less for direct tax changes and more for the economic direction it sets. Infrastructure-led growth, manufacturing depth, technology adoption, and fiscal discipline collectively support a more mature and resilient market ecosystem.  However, it is equally important to reiterate that market performance depends on multiple variables, including global conditions, interest rate cycles, and corporate execution and not on Budget announcements alone. As long-term stewards of household savings, mutual funds must continue to emphasize asset allocation, risk management, and investment discipline, rather than short-term sectoral positioning driven by policy headlines.

 

Union Budget 2026–27 reinforces continuity while preparing the economy for future challenges through infrastructure investment, manufacturing scale-up, technological capability, healthcare expansion, and fiscal responsibility. This combination may provide a constructive backdrop for long-term capital formation and investor confidence.

 

(Disclaimer: This article is by Ravi Kumar Jha, MD & CEO, LIC Mutual Fund Asset Management. Views expressed are his own.)