PTI
New Delhi
Finance Minister Nirmala Sitharaman will on February 1 present her ninth straight Union Budget, which is expected to unveil measures to sustain growth momentum, maintain fiscal discipline, and contain reforms that could buffer the economy from global trade frictions, including US tariffs.
The presentation of the Budget for April 2026 to March 2027 fiscal (2026-27) will be on Sunday, a first in independent India’s history.
Sitharaman’s sweeping income tax and GST cuts, together with spending on infrastructure and the RBI’s interest rate reductions, have so far helped the Indian economy withstand the punitive 50 per cent tariff US President Donald Trump has imposed on Indian goods. But now, she has to come up with measures to sustain the momentum. Job creation is expected to feature prominently, with possible incentives linked to labour-intensive manufacturing, skilling and apprenticeships.
Schemes supporting micro, small and medium enterprises (MSMEs), which have faced margin pressures from high input costs and tight credit conditions, could see enhanced allocations or credit-guarantee support.
There may also be refinements to production-linked incentive (PLI) schemes as the government assesses their impact on manufacturing capacity, exports and employment.
The Budget comes against a complex backdrop. While domestic demand has held up and inflation has moderated from recent highs, global uncertainties, including geopolitical tensions, volatile commodity prices and uneven monetary easing by major central banks, continue to cloud the outlook. At home, the government faces pressure to boost consumption, accelerate job creation and step up capital spending, while keeping the fiscal deficit on a downward path.
However, the tax cuts have nibbled into government revenue, limiting her options to support the economy in the new Budget.
Her biggest challenge will be to find a new growth driver, particularly against the backdrop of a global economy ravaged by heightened uncertainty and fragmentation, financial markets on a precipice, and global commodity prices on a continued uptrend.
Sitharaman, economists said, also faces the difficult task of restoring investor confidence in the near term, as uncertainty over India’s trade talks with the US has unsettled financial markets, with foreign investors continuing to sell Indian equities and pushing the rupee to a record low.
Some believe she may use the proven cash cow – petrol and diesel – to shore up revenues. Availing of a limited window available before international oil prices boil, the minister may raise excise duty on the two auto fuels. The duty hike is expected not to be passed on to consumers, but adjusted against the retail price cut that was warranted when global oil prices fell last year.
She may focus on simplifying regulations and pushing structural reforms to attract domestic and foreign investment.
Despite the tight purse strings, she is not expected to cut spending and may include new measures for the poll-bound states – West Bengal, Tamil Nadu, Kerala and Assam.
Some schemes may be re-packaged.
