Indore (Madhya Pradesh): Over the past year, India’s economic story has moved further towards our dream of achieving a Viksit Bharat.
Despite global uncertainty, slowing trade, and persistent geopolitical risks, India has continued to remain the world’s fastest-growing major economy. Inflation has moderated from post-pandemic highs, while public capital expenditure has continued to anchor investment sentiment.
In addition, employment indicators have improved gradually, infrastructure creation has accelerated, and India’s digital public architecture has deepened its reach.
Against this backdrop, this year, the expectations from the Union Budget 2026 are not about a dramatic course correction, but about consolidation with purpose – a budget for the nation as a whole to grow and evolve further.
The central government’s fiscal deficit stood at 4.9% of GDP in 2024–25, with a stated medium-term glide path towards sub-4.5%. For 2026–27, expectations are focused on a deficit of about 4.4–4.5% of GDP, and achieving this without cutting productive expenditure will be critical. It is essential to maintain this momentum while also allowing private investment.
Further, education and youth policy need to be a focus, as India is home to one of the world’s youngest populations. With 65% of the population below the age of 35, it becomes challenging to provide them with a quality of life, education, and employability.
The Ministry of Education was allocated ₹1.29 lakh crore in the 2025–26 Budget, marking a year-on-year increase of roughly 13%. This provides a solid base, but the effectiveness of spending will matter more than headline growth.
It is expected that this year's budget will focus more on empowering youth, whether at the school and college levels or in employment. Also, rather than investing solely in the physical expansion of educational services, digital infrastructure needs to be strengthened.
In higher education, India’s Gross Enrolment Ratio stands at around 28%, well below the long-term national target of 50%. Budget 2026 should therefore support capacity expansion in universities and identify ways to fund initiatives linked to research output, student progression, and graduate employability.
While industry demand is shifting quickly toward digital, green, and advanced manufacturing skills, targeted expansion of industry-linked skilling programmes, particularly in artificial intelligence, electronics, logistics, and renewable energy, also becomes crucial.
Among other sectors, infrastructure and logistics expenditure should remain a priority, as we move forward towards achieving our dream of Viksit Bharat and a Self-Reliant India.
Easy access to credit for MSMEs, regulatory simplification, strengthening primary care, and other measures should be considered. On taxation, modest simplification and base broadening would be fiscally wiser than significant rate cuts that risk narrowing the revenue base.
The risk for Budget 2026 lies at both extremes - over-expansion driven by untargeted subsidies could strain fiscal credibility, while excessive restraint could weaken India’s demographic advantage.
Thus, it is likely that this year’s budget will be well-balanced and maintain fiscal discipline while deliberately investing in education, skills, and youth, contributing to India’s growth.
Prof. Himanshu Rai, Director, IIM Indore
