Union Budget FY27: Economists back growth push, urge Sitharaman to sustain capex and deepen reforms

India’s strong economic expansion, low inflation and a reasonable fiscal deficit give the government the necessary space to unveil a growth-supportive budget for the next fiscal with focus on reforms, economists told finance minister Nirmala Sitharaman on Monday as she chaired her first customary stakeholder meeting for the upcoming budget.

Sitharaman is expected to present the budget for 2026-27 on the usual date of February 1 (2026) but a formal notification to this effect is awaited.

Some of the economists told the minister that the latest cuts in the goods and services tax (GST), on top of the income-tax relief granted in the 2025-26 budget, would spur consumption and encourage private players to step up investments in the coming fiscal, people familiar with the details told ET.


They also urged Sitharaman to keep up the central government’s elevated capital spending, which is expected to crowd in private investors and help sustain the growth momentum, the people said.

Some of them also called on the government to upgrade the manufacturing mission, announced in the last budget, into a broad-based manufacturing policy that caters for the needs of small and medium businesses, generates large-scale employment and reduces the country’s import reliance.

They pitched for policy support for large-scale adoption of the plug-and-play model to encourage private players to ramp up investments.

The meeting with more than a dozen economists was also attended by economic affairs secretary Anuradha Thakur, chief economic advisor V Anantha Nageswaran and other senior officials from the Department of Economic Affairs.

This meeting was followed by another with representatives from farmers’ associations and agriculture economists. Agriculture secretary Devesh Chaturvedi also took part in the second meeting.

The pre-budget meetings this year start against the backdrop of strong economic growth despite risks from 50% US tariffs on most Indian goods and other external headwinds.

India's growth scaled a five-quarter high of 7.8% in the April-June period. Subsequently, the International Monetary Fund revised up its 2025-26 India growth projection to 6.6% from 6.4%. The multilateral body expects the country to remain the world's fastest-growing major economy for at least two more years.

The finance ministry, in its monthly economic review for September, said the government had been focused on making the economy “resilient to external vulnerabilities through structural reforms" that include the latest GST reforms. It underscored that India’s growth outlook remains strong despite external headwinds but advised against lowering guard.

The Centre is also expected to meet its 2025-26 fiscal deficit target of 4.4% of GDP, having trimmed it from 9.2% in the pandemic year of FY21. Retail inflation hit an eight-year low of 1.54% in September.