A Budget for India's strategic growth, jobs and global competitiveness

The document will be pivotal in outlining agenda that sustains growth and capex, enhances manufacturing and technological capabilities, creates jobs, and makes our economy more dynamic and competitive

India continues to demonstrate resilience amid heightened global uncertainties. With the growth projection of 7.4 per cent in the financial year 2025-26 (FY26), it is the world’s fastest-growing large economy for the third year in a row. 

Beyond stable macroeconomic fundamentals, this growth has been driven by reforms, cuts in rates of income tax, and goods and services tax, and monetary easing, including a cumulative 125-basis point reduction in the repo rate. The government has also done well to forge new economic partnerships to diversify trade and strengthen supply chains. 

As we turn to the Budget this year, the scope for significant tax breaks or raising tax revenues is limited. Growth in gross tax revenues has been muted and there is a need to continue fiscal discipline. The central and state governments must continue their focus on reforms to ensure greater ease of doing business and more competitive factor markets.Growth in public capex must be sustained. Though private capex has been growing, it has been impacted by global uncertainties and the threat of dumping by other countries. 

Against this backdrop, I lay down a few areas and sectors that could act as strategic levers to turbocharge the economic engine in 2026. 

Accelerate manufacturing 

India’s sizeable manufacturing imports, estimated at over $450 billion, present both a risk and an opportunity. The Budget could announce policies and schemes that facilitate maximum value addition within the country and reduce imports, especially for products that expose India to disruption in external supply chains. 

“Champion sectors” as well as the top 50 products in which domestic manufacturing accounts for less than 50 per cent of consumption should be urgently identified. A case in point is the Ministry of Power, which is looking at developing local manufacturing for a multitude of products like sub-sea cables and high-conductivity copper rods. Investment in data centres over the next five years is estimated at ₹13 trillion. Approximately two-thirds of the products used in data centres need to be imported. 

Inability to create adequate domestic manufacturing in strategic areas will continue to result in higher imports, supply-chain vulnerability, a high current-account deficit, and volatility in the exchange rate. The National Manufacturing Mission can develop the road map and oversee the implementation of the above with the intent of building scale and capabilities in each identified sector or product. Product-specific strategic gaps such as access to technology, pricing power, and regulatory hurdles should also be included. 

Spur investment via disinvestment and sovereign wealth fund 

As of June last year, the government’s shareholding in listed entities was valued at approximately ₹46.3 trillion. However, the proceeds from disinvestment this financial year have been ₹8,768 crore. In FY25 and FY24, the proceeds were about ₹10,160 crore and ₹16,500 crore, respectively. Higher revenue generation through divestment is possible in buoyant capital markets. Therefore, a structured, multiyear divestment programme could unlock significant value and raise resources for the government. Entities in non-strategic sectors can be privatised. 

Divestment proceeds can provide a cushion for maintaining fiscal stability and drive government capex, and can be used to make long-term strategic investment, including in technology, resources, and infrastructure. 

Another way to use disinvestment proceeds is to create a sovereign wealth fund, which can be supplemented by allocations from pension funds managed by the government. 

Implement power reforms 

Many countries are using affordable energy to attract manufacturing investment. Expeditious implementation of proposed reforms by incentivising state governments is crucial. States hold regulatory assets of nearly ₹7 trillion and the annual losses are now nearing ₹2 trillion. Electricity tariffs for manufacturing are high with a cross-subsidy surcharge of ₹1.50 to ₹2 by states. Cost-based tariffs and privatising discoms or issuing additional distribution licences would make energy markets more efficient and affordable for industry. 

Unlock mining sector 

India’s imports of base metals, coal, and precious metals during April-December 2025 — worth $84 billion and representing 17 per cent of the country’s merchandise imports — underscore the need for domestic exploration and production. 

The development of underperforming coal and mineral assets by state-run and private companies should be fast-tracked, while the timelines for new mine development can be reduced from as much as five-eight years currently. In line with the recent changes in rules for petroleum and natural gas, which now combine a separate exploration licence and mining lease, the terms for mineral exploration licences should be amended to include mining rights to incentivise greater private capital flow into the sector. 

Prioritise tax-dispute settlements 

The Budget must continue the government’s endeavours to minimise tax disputes. Over ₹26.3 trillion (about 8 per cent of India’s gross domestic product) was locked in income-tax disputes as in FY25. Of the case-pendency, 89 per cent is at the first appellate level, whose workforce shortage is 40 per cent. Prioritising long-pending and high-value cases, more frequent virtual hearings, adequate manpower to the Central Technical Committee, and a close monitoring of disposing of cases are some easily implementable solutions. 

More than 300 matters are pending with the Board for Advance Rulings (BAR). Reconstituting the BAR with judges of high courts and retired members of the Income Tax Appellate Tribunal, laying down a timebound framework for admitting cases, and providing final rulings will help unclog pendency. Simultaneously, introducing a timebound mediation mechanism for tax disputes with an independent body of experts can reduce litigation by providing fair settlement at a pre-assessment stage. 

While there has been considerable progress, the advance pricing agreement (APA) programme still has over 850 cases pending before the authority. A “framework” approach for resolving pending cases with low complexity/risk, allocating additional and specialist resources, and a special window of “accelerated APAs” for old cases are some measures to consider. Amending the safe-harbour rules to make them more attractive will also help reduce the burden on APAs. 

Disproportionately invest in AI 

Given the massive investment across the world and the need for sovereign AI, the upcoming Budget could consider increasing allocation to the IndiaAI Mission while accelerating the development of a full sovereign AI stack. A sovereign DeepTech Fund that can support research & development, where traditional venture-capital funding is structurally constrained, could be looked at to leapfrog DeepTech technologies. 

Use tourism as an employment multiplier 

A relaunch of the Incredible India campaign, together with waiving visa fees and evisa coverage, will help increase inbound travel. Further, for the identified 50 tourist destinations, empowered destination management or local authorities should be set up. These authorities can be tasked with coordinating infrastructure development like hotels, improving access, branding and awareness, and creating ancillary activities to improve the attractiveness of tourism destinations. 

In all, the Budget will be pivotal in outlining an agenda that sustains growth and capex, enhances manufacturing and technological capabilities, creates jobs, and makes our economy more dynamic and competitive. Industry looks forward to the government articulating its plans to further deregulate the economy. 

The writer is regional managing partner, Africa-India Region, EY