Pre-Budget meetings with govt: Economists urge FM to push capex pedal

India’s leading economists are learnt to have urged Finance Minister Nirmala Sitharaman to keep ‘pushing the pedal’ on capital expenditure in the upcoming Union Budget 2026-27, even if that entails slower progress on fiscal consolidation in light of the global geopolitical situation. This was among the key suggestions made by economists in pre-Budget consultations held by the Finance Ministry on Monday under the stewardship of Minister Sitharaman.

 

Among the economists who attended the pre-budget consultations included part-time members of the Prime Minister’s Economic Advisory Council Sajid Chinoy and Neelkanth Mishra, Thirteenth Finance Commission member Indira Rajaraman, Crisil chief economist Dharmakirti Joshi; Nomura chief economist Sonal Varma, Morgan Stanley India Managing Director Ridham Desai, Centre for Development Studies director C Veeramani, and Lekha Chakraborty, professor at the National Institute of Public Finance and Policy. Ashwini Mahajan, national co-convenor of Swadeshi Jagran Manch, as well as Chief Economic Advisor V Anantha Nageswaran, were also present at the interaction.

 

 

Sources said economists cited examples such as slowing down of the housing market among reasons for the government to continue the heavy lifting on capital expenditure for its positive multiplier effects on the rest of the economy, and crowding in private sector investments. 

 

The government had ramped up public capex outlays to ₹11.21 trillion or 3.1 per cent of the Gross Domestic Product (GDP) in Budget 2025-26, 10.1 per cent higher than the revised estimate of ₹10.18 trillion spent in 2024-25. In the first half of this year, capital expenditure has risen 40 per cent year-on-year to hit ₹5.8 trillion. 

 

In a separate meeting, economists, farmers’ representatives and other stakeholders from the agriculture sector urged the finance minister to raise the funding for agriculture research and education that has annually reduced in real terms in the last two decades. This, they argued, was essential to make India’s farm sector more resilient to changing climatic patterns.

 

Some experts flagged that state governments’ debt has become unsustainable. “The borrowing cost of many private businesses is lower than that of most state governments. This inhibits investment in human resources. The Union government has to devise ways to curb this practice of transferring the burden to future generations,” said one of the experts who participated in the pre-budget meeting.

 

Some economists participating in the parleys suggested further promotion of pulses and oilseeds production to lower import dependency and an import duty policy that ensures that landed price of the commodity is not below the Minimum Support Price (MSP). It was also suggested that the animal husbandry department play a more proactive role in pushing the sector which was readily agreed to by the Finance Minister, a source said.

 

Experts also recommended that the Centre reboot the crop insurance scheme, Pradhan Mantri Fasal Bima Yojana, and must pay 90 per cent of the insurance premium under it. This is essential as most farmers and states are not satisfied with the crop insurance scheme and it needs a fresh look ten years after it was first launched. Suggestions were also made to restructure the fertiliser subsidy by raising urea costs 25 per cent.