Budget 2026 to focus on reforms as room for spending shrinks amid risks

To boost private investment and demand, govt has rolled out reforms in recent months, including income tax cuts, labour law overhauls and steps to open the tightly controlled nuclear power sector

Indian Prime Minister Narendra Modi's government releases its annual budget on Sunday, expected to strengthen domestic ‍policy reforms to cushion the ​economy from rising uncertainties such as steep US tariffs and broader geopolitical tensions.

But Finance Minister Nirmala Sitharaman, who presents the budget for next fiscal year at 11 a.m. (0530 GMT), will have to restrain spending as a share of gross domestic product, particularly after tax cuts are expected to reduce revenue by ₹1.5 trillion ($16 ​billion) for this fiscal year.

India's deficit target for the 12 months through March is 4.4 per cent of GDP.

"The nation is moving away from long-term problems to tread the path of long-term solutions. Long term solutions provide predictability that fosters trust in the world," Modi said on Thursday before the government's economic survey forecast growth of between 6.8 per cent and 7.2 per cent for the fiscal year starting in April.

 

India will continue with "next-generation reforms", as the next 25 years will be key to meeting the goal of making the South Asian nation a developed economy, he said.

To spur private investment and demand, New Delhi has rolled out a series of reforms in recent months, including consumption and income tax cuts, overhaul of labour laws and steps to ‌open up the tightly controlled nuclear-power sector. More ​policy changes are expected in the budget.

Modi's government also plans a third major push to boost manufacturing as a share of the economy, after two failed attempts. It is also expected to ease rules for investments in defence manufacturing.

Gross borrowing ‍is expected to rise to between ₹16 trillion and ₹16.8 trillion for the year starting in April from this fiscal year's ₹14.6 trillion.

India ‌is also striking ​deals such as a landmark trade agreement with ‍the European Union to offset the hit from the 50 per cent tariffs President Donald Trump ‍has ‍imposed on some ‌Indian goods shipped to the US.