Budget 2026-27 prepared under better-than-expected growth and inflation, says chief economist
New Delhi: The upcoming Union Budget is being crafted under a favourable economic scenario, following higher-than-expected growth and lower inflation, according to Dharmakirti Joshi, Chief Economist at Crisil. While global uncertainty persists, the government aims to maintain fiscal prudence and economic stability.
Growth and Inflation Outlook
Joshi highlighted that the economy performed better than anticipated, with growth exceeding projections and inflation remaining low. The government has upgraded the GDP forecast for FY 2025-26 to 7.3–7.4%, up from 6.3%, a revision mirrored by the IMF. Real growth is expected to moderate to around 6.7% next year. A re-basing of GDP data, scheduled for February 27, could further refine perceptions of India’s economic size and pace.
A higher nominal GDP is expected to improve tax collections and corporate performance, giving the government more flexibility in budget allocations. Joshi stressed that maintaining fiscal discipline will remain crucial, especially given state-level borrowing, which continues to keep government bond yields elevated.
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Trade and Exports
International trade agreements are a priority, with potential deals with the United States and the European Union offering exporters more certainty. Joshi noted that India faces some of the highest tariffs globally, and successful agreements could help reduce trade barriers and strengthen export growth.
Private capital expenditure is improving in sectors such as steel, cement, and oil and gas, though Joshi cautioned that a broad-based revival driven by “animal spirits” is not yet evident. Future budget allocations are likely to encourage investment in emerging sectors like electronics and advanced battery technologies (ACC batteries).
Joshi suggested that frequent changes in taxation should be avoided, highlighting that income tax rates have been rationalised and GST rates lowered. The budget is expected to continue reforms aligned with the ‘Viksit Bharat by 2047’ vision, focusing on incentivising key growth sectors.
(With ANI inputs)