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Budget 2026 to Prioritize Defence, Minerals, and Infrastructure Growth

The upcoming Union Budget for FY27 is expected to emphasize strategic sectors like defence, critical minerals, power, and infrastructure while maintaining fiscal discipline. According to a Motilal Oswal report, investors anticipate targeted measures rather than large announcements, setting a low bar for positive surprises. The budget's influence has narrowed due to extra-budgetary steps, making selective sectoral growth drivers key for market sentiment. Fiscal policy is likely to remain prudent, with a potential minor stretch aimed at productive capital expenditure over transfer payments.

Key Points: Budget 2026 Focus: Defence, Critical Minerals, Power, Infra

  • Defence & critical minerals focus
  • Fiscal consolidation path maintained
  • Selective consumption stimulus expected
  • Capex in strategic sectors
2 min read

Budget 2026 likely to focus on bolstering defence, critical minerals, power, infra

Union Budget 2026 likely to emphasize defence, critical minerals, power, and infrastructure while balancing fiscal discipline, says Motilal Oswal report.

"investors do not expect large substantive measures as the FM grapples to address multiple variables - Motilal Oswal Report"

New Delhi, Jan 28

The Union Budget 2026 will place greater emphasis on sectors like defence, critical minerals, power, electronics, infra and higher growth in affordable housing, a report said on Wednesday, adding that policymakers balance growth priorities with fiscal discipline amid global uncertainty.

With limited anticipation of big-ticket announcements, even selective measures could deliver positive market sentiment, said Motilal Oswal Financial Services Ltd in its 'India Strategy' report.

The forthcoming FY27 Union Budget has to strike a deft balance of sustaining growth momentum and maintaining fiscal consolidation, even as it also needs to address near-term challenges emanating from unprecedented geopolitical flux.

"In our discussions, we sensed that investors do not expect large substantive measures as the FM grapples to address multiple variables - thus setting the base lower for some positive surprise," the report mentioned.

The scope of influence of the budget has become relatively narrower over the years, owing to a flurry of extra-budgetary steps - hence, equity markets will be assessing it for targeted, selective measures to drive growth in certain sectors and to assuage investor sentiments, it added.

The government has been steadfast on the path of fiscal consolidation, with the fiscal deficit easing from Covid induced high of 9.2 per cent to 4.4 per cent for FY26E (estimated).

"We believe that government will largely maintain its fiscal rectitude and do not expect major deviation from this path. However, given that FY27 will mark a transition to debt/GDP as a targeted fiscal marker and that overall consumption is yet to recover fully and sentiment is improving unevenly, a scenario of pragmatic, minor fiscal stretch is not completely ruled out," the report noted.

Equity market will likely support such move, especially if it is well-targeted towards productive capex or consumption boost, rather than low multiplier-laden transfer payments or administrative expenses.

Given that the FY26 Union Budget was more tilted towards stimulating middle-class consumption (through personal income tax forbearance of Rs 1 lakh crore), and its effects are yet to play out fully, "we believe that the FY27 Union Budget's approach to stimulating consumption will be selective".

"Consequently, the budget is likely to focus more on capital expenditure, especially in sectors deemed to be strategically important owing to prevailing geopolitical compulsions," it said.

- IANS

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Reader Comments

P
Priya S
While defence and infra are important, I hope affordable housing doesn't get sidelined. The middle class is still struggling with high property prices in cities. The tax relief last year was good, but we need more concrete steps for housing.
R
Rohit P
Critical minerals is a smart focus area. We need to secure our supply chains for electronics and green tech. But fiscal discipline is key - hope they don't stretch the deficit too much. The report's balanced view makes sense.
M
Michael C
As an investor watching the Indian market, selective, well-targeted measures are better than big populist announcements. The focus on productive capex over transfer payments is the right approach for sustainable growth.
S
Shreya B
Power sector investment is crucial! My hometown still faces frequent load shedding. Hope this translates to better grid infrastructure and maybe incentives for solar power at the household level. 🙏
K
Karthik V
With respect, I think the budget's influence is indeed narrower now. Most big reforms happen outside the budget. So managing expectations is wise. A stable, predictable fiscal policy is what businesses really need.

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