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Budget 2026: Capex Push to Continue Amid Fiscal Constraints, Says HSBC

The upcoming Union Budget is expected to maintain its strong focus on capital expenditure to sustain economic growth, according to an HSBC Mutual Fund preview report. The report suggests limited scope for major policy announcements or tax changes due to constrained fiscal levers. Key spending priorities are likely to include infrastructure, defence, agriculture, rural development, and technology, including artificial intelligence. Policy continuity and gradual fiscal consolidation are set to define the budget's approach, with potential targeted support for export sectors affected by high tariffs.

Key Points: Budget 2026: Continuity in Capex Focus Expected, HSBC Reports

  • Capex continuity expected
  • Limited room for major policy shifts
  • Defence, agriculture, tech to see focus
  • Fiscal discipline to be maintained
2 min read

Budget likely to see continuity in government's capex push: HSBC report

HSBC report previews Union Budget 2026, expecting sustained capital expenditure focus on infrastructure, defence, and tech, with limited major policy shifts.

"On the expenditure front, we may continue to expect continuity in the Centre's commitment to CapEx - HSBC Mutual Fund Report"

New Delhi, January 25

The upcoming Union Budget is expected to maintain continuity in the government's capital expenditure push, even as policymakers operate within a constrained fiscal and policy environment, according to a budget preview report by HSBC Mutual Fund.

A capex expenditure worth Rs 11.21 lakh crore (or 3.1 per cent of GDP) was earmarked in 2025-26, rising year-on-year.

The report noted that while the government has limited room for large policy shifts or major announcements, expenditure priorities are likely to remain focused on sustaining growth through public investment.

"On the expenditure front, we may continue to expect continuity in the Centre's commitment to CapEx," the report said, underscoring infrastructure spending as a key pillar of economic strategy despite ongoing fiscal consolidation efforts.

HSBC Mutual Fund is of the view that the Budget is unlikely to introduce major changes to tax policy, given the limited policy levers available.

"Unlikely to see major policy changes or big-bang policy measures at this Budget given the limited policy levers," it said.

Transfers to states and the use of long-dated, interest-free loans from the Centre to the States are also expected to remain in focus.

From a spending perspective, the report identified defence, agriculture and rural development as sectors that could see targeted allocations, alongside increased attention to technology and artificial intelligence.

The report also pointed to the possibility of continued support for manufacturing and exports.

"Fiscal discipline and policy continuity following last year's Budget may in itself be growth supportive. Having said that, given the persistently high tariffs, we think the government might come up with steps to support tariff-hit export sectors - either by way of subsidies, incentives or targeted support, possibly, in its recently established Export Promotion Mission," it said.

Policy continuity amid gradual fiscal consolidation is likely to define the budget's approach, with capex remaining central to the government's growth strategy in the year ahead, the report asserted.

As has been the convention, the Union Budget for 2026-27 will be presented in the Parliament on February 1, 2026.

- ANI

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Reader Comments

P
Priya S
As a small business owner, I'm relieved there won't be major tax shocks. Policy stability is crucial for planning. But I do wish for some relief for the MSME sector, which is still recovering.
R
Rohit P
Defence and agriculture getting targeted allocations is the right move. We need to be self-reliant in both food and security. Jai Jawan, Jai Kisan should remain the priority.
S
Sarah B
While fiscal discipline is important, I hope the focus on AI and tech isn't just lip service. We need concrete plans and funding for skilling our youth for these new-age jobs. The digital divide is still very real.
V
Vikram M
Good to see exports getting a mention. With global headwinds, our manufacturers need all the support they can get. Incentives should be streamlined and easy to access, not lost in red tape.
K
Karthik V
Respectfully, I have to disagree with the 'no major changes' approach. The economy faces unique challenges now. Sometimes continuity feels like complacency. We need bold thinking for job creation, especially for our graduates.
M
Michael C
The report makes sense. You can't have big-bang reforms every year. Consolidating the gains from past capex spending and ensuring those projects are

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