Budget 2025 vs 2026: How India’s Fiscal Strategy Has Evolved

Budget 2025 and Budget 2026 were framed under different macroeconomic conditions. While the earlier budget focused on managing uncertainty and maintaining stability, the latest budget signals greater confidence in economic fundamentals. 

With growth holding up and inflation relatively contained, Budget 2026 places emphasis on long-term priorities while maintaining continuity in fiscal management.

A Shift in Fiscal Approach

One of the key differences between the two budgets lies in how the government has positioned its fiscal stance. 

Budget 2025 prioritised consolidation, setting the fiscal deficit at 4.4% of GDP amid global volatility. Budget 2026 maintains this discipline, with the deficit estimated slightly lower at 4.3% of GDP.

What distinguishes Budget 2026 is the added clarity on public debt. The government has outlined a medium-term objective of bringing the debt-to-GDP ratio to around 50% by 2030, offering forward guidance that was not explicitly stated last year.

Capital Expenditure Remains Central

Public investment continues to play a central role in the government’s growth strategy. Budget 2026 increases planned capital expenditure to ₹12.2 lakh crore by FY27, building on the elevated spending levels seen in recent years.

Beyond higher allocations, the current budget introduces structural mechanisms such as risk guarantees for infrastructure projects, asset monetisation through REITs, expansion of freight corridors and a renewed focus on inland and coastal waterways. 

The emphasis has shifted from spending alone to improving efficiency and private sector participation.

Manufacturing and MSMEs: A Deeper Ecosystem Focus

While Budget 2025 supported manufacturing largely through targeted incentives, Budget 2026 broadens the approach by strengthening supporting systems. 

New measures cover electronics, semiconductors, defence manufacturing and related supply chains, supported by customs duty adjustments rather than broad subsidies.

For MSMEs, the budget introduces steps aimed at improving liquidity and access to capital, including a dedicated growth fund, wider use of digital invoice platforms and enhanced credit guarantees. 

The focus has moved from easing compliance to addressing structural financing challenges.

Services and Export-Oriented Policies

Services receive more explicit policy attention in Budget 2026 compared with the previous year. Measures aimed at IT services, cloud infrastructure, digital content, healthcare tourism and education-linked exports point to a clearer export-oriented strategy.

Tax and regulatory clarity for foreign and domestic service providers is intended to reduce uncertainty and improve competitiveness, an area that received relatively limited structural support in Budget 2025.

Defence and Agriculture Priorities

Defence spending sees a notable increase in Budget 2026, with higher allocations for both capital expenditure and operational needs. The emphasis remains on capacity building and modernisation.

In agriculture, the approach remains broadly consistent with last year. The budget focuses on productivity, technology adoption and value-chain development across fisheries, horticulture and allied activities, without introducing major market reforms or income-linked support mechanisms.

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Conclusion

Taken together, Budget 2026 builds on the foundation laid in Budget 2025, retaining fiscal discipline while providing clearer long-term direction. The shift from short-term stabilisation to structural planning is evident across capital expenditure, manufacturing, services and debt management. 

While execution will be key, the budget reflects a continuation of policy priorities with incremental changes rather than a sharp departure from the past.

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