India’s Finance Minister Nirmala Sitharaman will present the Union Budget for 2026–27 on February 1, marking her ninth consecutive budget and the third full budget of the National Democratic Alliance (NDA) 3.0 government.
Coming against the backdrop of resilient economic growth, global trade uncertainty and rising expectations from households and businesses, this budget is being seen as a crucial policy signal and fiscal reset for India’s medium-term growth path. For income taxpayers, NRIs and investors, the focus is likely to be on tax relief, capital market stability, export competitiveness and fiscal discipline.
Growth backdrop and revenue math
The world’s fourth-largest economy, which is on track to upstage Germany as the third-largest by 2027-28, is projected to grow at 7.4 per cent in the current fiscal, according to official estimates, up from 6.5 per cent in the previous year. However, nominal GDP growth — which directly influences tax collections — is expected to slow to around 8 per cent, the weakest pace in five years. This places pressure on the government to balance fiscal consolidation with growth-oriented spending. Markets will closely watch whether the Indian government maintains its glide path towards a lower fiscal deficit while sustaining capital expenditure on infrastructure and manufacturing.
Will tax relief continue?
Taxpayers are entering budget week with elevated expectations after last year’s headline reform that made annual income up to Rs1.2 million tax-free under the new tax regime. Analysts expect the government to fine-tune slabs, widen deductions for salaried employees and further simplify compliance rules to nudge more citizens into the new regime.
There is also speculation around higher standard deductions, rationalisation of surcharge structures for high earners and streamlined capital gains taxation. With consumption emerging as a key growth driver, targeted tax relief could support discretionary spending while keeping revenue buoyancy intact.
NRIs: Taxation of overseas income
For NRIs, clarity on taxation of overseas income, simplified reporting requirements and smoother repatriation norms remain top priorities. India continues to be one of the world’s largest recipients of remittances, with annual inflows exceeding $125 billion, providing a stable foreign exchange cushion.
Market participants and analysts expect the budget to strengthen digital tax compliance systems, reduce procedural friction for foreign investors and NRIs, and improve clarity on capital gains tax treatment for overseas Indians investing in equities, real estate and alternative assets. Measures to ease double taxation disputes and simplify documentation for returning Indians could also feature prominently.
“If the budget successfully balances household relief, investor confidence and long-term infrastructure priorities, it could reinforce India’s reputation as one of the world’s most resilient large economies — at a time when global markets remain volatile and trade tensions continue to rise,” says K.V. Shamsudheen, Dubai-based director of Barjeel Geogit Securities.
Investors eye policy continuity
Equity investors are looking for signals of policy continuity, stable taxation and predictable regulatory frameworks. With the Sensex having corrected more than 5 per cent from its late-2025 peak, markets are sensitive to fiscal discipline and macro stability, Shamsudheen adds.
Export incentives, rationalisation of customs duties and targeted sector support are expected as India seeks to cushion the impact of potential US tariff actions under President Donald Trump. Analysts say a supportive Budget for manufacturing, logistics and MSMEs could help protect corporate margins and sustain earnings growth.
There is also anticipation of further reforms to deepen bond markets, expand retail participation and promote long-term savings instruments, especially in the context of rising global volatility.
Startups, innovation push
India’s startup ecosystem is pressing for stronger incentives to accelerate deep-tech and artificial intelligence development. Industry leaders have called for enhanced R&D tax credits, lower cloud and data infrastructure costs, and simpler ESOP taxation rules to help companies attract global talent.
Entrepreneurs are also seeking easier access to domestic growth capital, clearer GST treatment for SaaS exports and reduced compliance friction that often forces startups to incorporate overseas. Policymakers are expected to strengthen the Production-Linked Incentive framework and expand DPIIT-backed funding programmes to keep India competitive in next-generation technologies.
Infrastructure, urban development
Infrastructure spending remains central to India’s growth strategy. Experts are calling for reforms in project execution, lifecycle-based funding models and stronger emphasis on operations and maintenance to ensure long-term asset productivity.
The real estate sector is looking for higher allocations to urban housing programmes and revisions to affordable housing thresholds to reflect rising construction and land costs. Developers are also pushing for GST rationalisation on under-construction homes and faster approval processes to revive stalled projects and boost supply in Tier-2 and emerging cities.
Energy, EVs and sustainability
Energy independence is emerging as another major Budget theme. Industry leaders are urging the government to rationalise taxes across the oil and gas value chain, bring transport fuels under GST and accelerate biofuel and offshore exploration programmes.
The electric vehicle sector expects recalibration of incentive schemes, higher R&D support and stronger domestic manufacturing incentives to reduce import dependence and build scale. Analysts say sustained public investment in clean mobility and renewable energy could help lower crude imports while supporting India’s climate commitments.
Agriculture and rural economy
Despite strong policy intent, several farm sector initiatives announced last year remain under implementation. Stakeholders are looking for faster rollout of credit schemes, productivity missions and seed development programmes. With agriculture employing nearly half of India’s workforce, the Budget’s rural focus will be crucial for income stability and consumption demand.
What markets will judge
Beyond headline announcements, investors will closely examine the fine print on fiscal deficit targets, borrowing plans and capital expenditure allocations. Policy continuity, credible consolidation and targeted growth spending are likely to be the key benchmarks.
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