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The upcoming Union Budget is expected to prioritize growth by significantly enhancing capital expenditure (CAPEX) with key focus areas anticipated to include infrastructure projects such as roads, water supply systems, metro systems, railways, defence, digital infrastructure, green technologies, and social welfare initiatives, according to Axis Securities report.
Axis Securities mentioned, "We believe the government's policy reforms, such as Atmanirbhar Bharat, Make in India, and the PLI scheme, are likely to continue in FY26 as well and would receive further impetus. We believe a balanced act between Infrastructure and social welfare schemes would help the economy regain its growth momentum moving forward." This increased spending is expected to foster long-term economic growth, create jobs, and support investment-driven growth. Private CAPEX, which has remained sluggish in recent years, is also expected to receive a boost, especially with the potential expansion of the PLI scheme beyond its current sectors. The CAPEX allocation for FY26 is anticipated to range between Rs 11 trillion and Rs 11.5 trillion, reflecting a 15-17 per cent increase compared to the revised spending for FY25. With the rural economy still grappling with the effects of inflation and reduced purchasing power, the government is expected to allocate more funds to rural welfare schemes. The Budget is likely to focus on providing relief in the form of food and fertilizer subsidies, while also increasing investments in affordable housing. This strategy aims to spur demand in the rural economy and help it recover to pre-COVID levels. A central goal for the government in FY26 will be to boost consumption and stimulate job creation. This could mean more incentives for infrastructure projects, social welfare schemes, and fiscal expansion. Job creation through government-led initiatives is considered essential, as private sector CAPEX remains sluggish. Axis Securities anticipates the government will maintain a careful balance between fiscal consolidation and growth. The fiscal deficit for FY25 is expected to be kept below 4.9 per cent, with a long-term target of 4.5 per cent by FY26. India's tax revenues are showing healthy growth, with direct tax collections reaching Rs 16.89 trillion (77 per cent of the budget estimate) as of January 2025. The total indirect tax collections have also increased by 12.9 per cent, led by strong growth in CGST. The fiscal deficit is likely to narrow slightly in FY25 due to positive growth in revenue receipts. While the disinvestment receipts for FY25 have fallen short of expectations, overall government revenue trends point towards room for more aggressive CAPEX spending in FY26. Subsidy bills, particularly for fertilizers and food, are likely to exceed the budget estimates, requiring additional funds to support the government's welfare schemes. (ANI)
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