The Hindu Editorial Analysis
17 January 2026
Budget 2026–27 must keep the growth momentum
(Source – The Hindu, International Edition, Page no.-8 )
Topic: GS Paper – GS-3 : Indian Economy, Public Finance, Growth & Development, Infrastructure
Context
Despite global economic headwinds in 2025, including fears of protectionist trade measures such as high U.S. tariffs, the Indian economy demonstrated notable resilience. This performance was underpinned by sustained reforms, macroeconomic stability, and policy continuity. As India prepares Budget 2026–27, the editorial argues that the challenge lies in preserving growth momentum while adhering to fiscal consolidation, strengthening domestic growth drivers, and addressing structural bottlenecks that constrain private investment and competitiveness.
Core Issue
The central issue is how Budget 2026–27 can balance fiscal prudence with growth acceleration.
The budget must reinforce productivity-enhancing public expenditure, crowd in private investment, and ensure policy certainty, without derailing the medium-term fiscal consolidation path.
Strengthening Domestic Growth Levers
India’s growth strategy must focus on:
- Sustaining public capital expenditure,
- Supporting social sector spending,
- Maintaining debt sustainability.
Growth-enhancing investments, particularly in infrastructure and strategic sectors, are essential to offset global uncertainties and support long-term expansion.
Continue the Focus on Defence
Defence remains a critical pillar of strategic and economic strength.
Key priorities include:
- Increasing defence capital outlay to around 30% from the budgeted estimate of 26.4% for 2025–26.
- Enhancing allocations to Defence Research and Development Organisation (DRDO) by at least ₹10,000 crore.
- Strengthening defence industrial corridors in Uttar Pradesh and Tamil Nadu, and considering a new corridor in eastern India.
Private enterprises have contributed nearly 65% of defence exports in 2024–25. Institutional mechanisms such as a defence export promotion council could further boost coordination and help achieve the export target of ₹50,000 crore by 2028–29.
Clean Energy and Critical Minerals
The transition to clean energy and strategic technologies such as semiconductors has increased demand for critical minerals.
Policy measures include:
- Leveraging the National Critical Mineral Mission (NCMM) to secure supply chains.
- Introducing a dedicated tailings recovery programme to extract minerals from mining waste.
- Offering specialised financing to support exploration and processing.
Such steps are essential for energy security and technological self-reliance.
Export Competitiveness and Technology
Exports require renewed policy thrust amid a challenging global environment.
Key measures include:
- Enhancing budgetary support for the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme beyond the current allocation.
- Providing clarity in transfer pricing frameworks, particularly for Global Capability Centres.
- Supporting drone adoption and exports through:
- Expanded production-linked incentives,
- Dedicated drone R&D funds.
These initiatives can help position India as a competitive manufacturing and technology hub.
Finance, Credit, and Capital Markets
Deepening corporate bond markets is vital for diversifying finance beyond banks.
Proposed steps include:
- Lowering borrowing thresholds to widen issuer participation,
- Encouraging listed and unlisted corporates to raise funds through bonds,
- Increasing insurance investment caps beyond the current 25% limit,
- Revising investment-grade thresholds to allow prudent exposure to lower-rated issuers.
These reforms can unlock long-term capital for infrastructure and industry.
Addressing Tax and Regulatory Bottlenecks
Structural inefficiencies continue to deter investment.
Priorities include:
- Reducing pendency in tax disputes, particularly at the Commissioner of Income Tax (Appeals) level.
- Implementing a dual-track dispute resolution system:
- Fast-track for low-value cases,
- Detailed scrutiny for complex or high-value matters.
- Filling vacancies in appellate bodies.
Customs tariff reforms must also continue, including rationalisation of duty slabs and correction of inverted duty structures to enhance manufacturing competitiveness.
Trade Facilitation and Ease of Doing Business
Newly incorporated companies, including those within established business groups, should be made eligible for Authorised Economic Operator (AEO) certification.
Removing restrictive eligibility conditions will:
- Enhance trade efficiency,
- Reduce logistics costs,
- Facilitate smoother integration into global value chains.
Conclusion
Budget 2026–27 must reinforce India’s growth trajectory by combining fiscal discipline with decisive reforms that strengthen competitiveness, deepen capital markets, and resolve structural bottlenecks. By sustaining public investment, ensuring policy clarity, and crowding in private capital, the Budget can preserve momentum and lay the foundations for durable, broad-based growth in an uncertain global environment.
Maintaining growth is not merely about higher spending, but about strategic allocation, institutional reform, and confidence-building policy continuity.