IAS/UPSC Coaching Institute  

17 Jan 2026 : Budget 2026-27 must keep the growth momentum

Editorial 2: ​​​Budget 2026-27 must keep the growth momentum

Context

It must focus on boosting domestic growth, ensuring policy certainty, and removing structural bottlenecks.

 

Introduction

Despite global headwinds in 2025, India defied concerns that U.S. tariffs would derail growth. The economy’s resilience reflected sustained reform-oriented policies, with the Prime Minister describing reforms as a continuous national mission. The Union Budget 2026–27 can reinforce this momentum by strengthening domestic growth drivers through higher productive capital expenditure and social spending, while adhering to fiscal consolidation and containing debt risks.

 

Strengthening Defence and Strategic Capabilities

  • Sustain focus on defence capex by raising the capital outlay share to 30% from 26.4% in 2025–26.
  • Increase DRDO funding by at least ₹10,000 crore to accelerate indigenisation and innovation.
  • Build on the success of defence industrial corridors in Uttar Pradesh and Tamil Nadu by establishing a new corridor in eastern India.
  • Boost defence exports, where private firms contribute ~65%, by creating a Defence Export Promotion Councilto improve coordination and help reach ₹50,000 crore by 2028–29.

 

Driving Growth through Exports, Technology, and Clean Energy

  • Leverage the National Critical Mineral Mission (NCMM) with a tailings recovery programme and dedicated financing to secure critical minerals.
  • Provide a stronger export policy push by significantly increasing allocations for RoDTEP to enhance competitiveness.
  • Strengthen India’s role as a Global Capability Centre hub with clear transfer pricing guidance across categories.
  • Accelerate drone adoption and exports by scaling support—raise PLI outlay to ₹1,000 crore and create a ₹1,000 crore drone R&D fund.

 

Deepening Finance and Credit Markets

  • Broaden corporate bond markets to reduce over-reliance on banks by lowering qualifying borrowing thresholds and expanding the issuer base to include listed and unlisted firms.
  • Encourage large corporates to diversify funding through market borrowings.
  • Raise insurance investment caps beyond 25% and relax the Approved Investment rating norm from AA to AA-.
  • Allow provident funds to invest in non-convertible debentures of InvITs and REITs, channeling long-term capital into infrastructure.

 

Resolving Tax, Trade, and Customs Bottlenecks

  • Reduce tax dispute pendency at the CIT(A) level by prioritising high-pitched cases, older appeals, and matters settled by higher courts.
  • Introduce a dual-track system—fast-track for simple cases and detailed scrutiny for complex ones—and fill 40% vacancies.
  • Ease AEO certification norms for newly incorporated firms under AEO-accredited groups to boost trade efficiency.
  • Continue customs tariff reforms by simplifying slabs, correcting inverted duty structures, and aligning duties across value chains to support domestic manufacturing.

 

Conclusion

Budget 2026–27 should aim to sustain India’s growth momentum by deepening competitiveness across sectors and reinforcing the domestic drivers of expansion. By balancing fiscal prudence with measures that unlock industry-wide growth potential, provide policy certainty, and address structural bottlenecks, the Budget can effectively crowd in private investment and strengthen India’s global competitiveness.