Trade deal signed herald a new environment for India : Free Press Journal 17th Feb 2026

 

New CPI index is less volatile, suggests prolonged pause on rates: Indian Express 17th Feb 2026

 The new CPI index with the updated basket of goods and services shows inflation at 2.8 per cent in January. While the number was expected to be in this region, the composition of the index merits attention. The weight of food items is now 36.8 per cent as against almost 46 per cent earlier. This sharp fall of almost 10 per cent is significant. But the share is still higher than that in other metrics. For instance, in the private final consumption expenditure data, the share of food and beverages is around 31 per cent in nominal terms and 28 per cent in real terms.

In the National Statistics Office’s Household Consumption Expenditure Survey for 2023-24, the share of food is 47 per cent for rural households and 39.7 per cent for urban households. If values are assigned to the free food being provided by the government, the shares go up by 0.9-1.4 per cent. In comparison, in the new index, food and beverages have a weight of 42 per cent in rural and 30 per cent in urban areas.

It is interesting to see how the weightage of the food basket in consumer price indices varies in other countries. In the US, the share of food is around 13-14 per cent. It is at similar levels in Germany. In the UK, it is lower at 11-12 per cent, while in France, it is higher at around 16 per cent. In Italy, it is closer to 18 per cent. Japan probably has the highest share among developed countries at 26 per cent. Among these high-income countries, we find a higher weightage of around 8-15 per cent for education and recreation. As India continues on its development trajectory, it should also witness a similar trend. In these countries, as food has a lower share, monetary policy is more effective as several components of household consumption like housing and automobiles have considerable weight in the price index.

In emerging markets, while the share of food is slightly higher when compared to high-income countries, it is still well below that of India. In China, it ranges between 20 and 25 per cent. It is 20-26 per cent in Brazil and 17-18 per cent in South Africa. This indicates that none of these major economies has food constituting more than 30 per cent of the price index. However, in the case of East Asian economies, the situation is slightly different and closer to India. For instance, Vietnam is close at around 34-35 per cent. But this includes takeaway food as well. Malaysia is next with a share of almost 30 per cent, followed by Indonesia at 25 per cent.

For India, the decline in the share of food in the price index does suggest it will make headline inflation less volatile as food products normally witness wide price swings. This will have implications for monetary policy. Given that core inflation has been higher so far and has greater weight in the index, we can expect a prolonged pause by the Monetary Policy Committee this year.

CRR can be used to provide liquidity Business Line February 12th 2026

 One of the expectations from the credit policy was an announcement of a calendar for open market operations. This was against the backdrop of fluctuating liquidity over the last two months or so. True, there is a surplus right now but this can change again in March when the advance tax payments have to be made. The policy has assured supply of liquidity as and when needed, which also includes situations when the government’s cash balances with the central bank increase. Such a situation may not arise as the government tends to expedite spending towards March to meet targets. The question to be addressed is: what are the options when it comes to supplying liquidity?

The RBI has several instruments that can be used. All of them have different objectives. The system surplus or deficit is denoted by the balances after RBI interventions through repo rate, VRR (Variable Repo Rate), SDF (Standing Deposit Facility), etc. The net outstanding amount reflects the net state of liquidity. These are the daily operations of the RBI under the liquidity framework. But there are also open market operations where government securities are bought and sold. Further, there are forex swaps which deliver similar results. The merits of each can be examined.

The first tool to be used is the overnight repo or VRR which can go up to 14 days. Their tenures provide clues on how the RBI views the liquidity position. These can be viewed as tools for temporary deficits.

will market making give India's corporate bond the fillip it long needed? Mint 11th February 2026

 https://www.livemint.com/market/bonds/budget-proposal-market-making-india-corporate-bond-government-securities-liquidity-11770638495049.html

How should India look at AI: Free Press Journal 4th February 2026

 https://www.freepressjournal.in/analysis/how-india-should-look-at-ai-opportunity-efficiency-and-the-challenge-of-inequality

One of the primary issues discussed at the 2026 World Economic Forum Annual Meeting in Davos was AI and its impact. AI is an inevitability, and while one can be slow to adopt the same, it must be accepted over time. This is more so as a start has been made in almost every industry. There are definite gains to be made by adopting AI, but concerns remain for both companies and governments.

What the WEF survey shows
A survey carried out by the WEF among economists revealed some interesting results. Around 54% of those surveyed agreed that AI will lead to displacement of existing jobs, indicating acceptance of this outcome. Around 45% believed that AI will increase profit margins of companies using more AI, which means efficiency gains are to be had. Thirty-seven per cent felt that there would be increased access to goods and services, and 30% voted in favour of the affordability of goods improving. Around 24% were concerned about increasing concentration in industry, while 21% had apprehensions about discrimination against some demographic groups. These results broadly tell us everything about the pros and cons of AI.

Efficiency gains across industries
How does it stack up in India? It is almost unequivocal that there are efficiency gains to be had across various industries. Customer service is one area across all companies which will be enhanced with the greater use of AI, as it involves creating chatbots which can address most issues that are faced by people. Almost all service sector industries have started using such tools to enhance efficiency, and it may soon obviate the need to have call centres to address issues. In fact, all businesses which face the retail customer will have to necessarily adopt AI to enhance customer experience.

Use of AI in key sectors
Let us see how it is used in different sectors. In the BFSI space, it is being used for credit evaluation, as AI can pick up all information of the company which seeks to borrow funds and can assemble the same and make predictions on the servicing of the same. With algorithms running, the right price can also be suggested. The same tools can track the company as part of the credit monitoring process and throw up signals on delinquency based on predefined indicators. Therefore, there is an end-to-end solution being provided. Further, fraud detection also becomes easier with the use of AI and hence can add a lot of value for the industry.

In the case of the IT sector, there are already several changes taking place, with the entire coding process and programming being outsourced to AI. Further, solutions offered by these companies to clients are already using AI to speed up projects with higher levels of efficiency. In retail, the entire customer relation module is being programmed through AI to ensure better delivery of products. In fact, having all data on customers frequenting a store helps to ascertain tastes and preferences, which help in stocking goods. In healthcare, the supply chain management is being provided by AI. Therefore, this is something which is inevitable in any business, and there are clear advantages of using the same.

AI in planning and strategy
AI is used progressively by companies for planning business in the future, and strategies are based on inputs provided through AI tools. It becomes easier to scout the environment, bring in global perspectives and assemble data on various aspects of business, including what the competition is doing when budgeting.

Cost and energy concerns
There is, of course, the cost of using AI, as technology is not cheap and the consumption of power has also increased commensurately. WEF reckons that by 2035, global data centre electricity use could exceed 1,200 terawatt-hours, nearly triple the 2024 levels. There is a need to align AI growth with energy system capacity and sustainability goals. But companies reckon that over time these costs would come down and finally add to the bottom line. Leaving aside these costs, how does this stack up for a country like India?

India’s labour challenge
India is a labour-surplus economy, with a very large pool of youth. The challenge is that the skill sets are still lacking, and while the numbers are large, their employability is limited. This is one reason as to why the largest employers today are logistics and construction, where few skills are required. Therefore, hiring employees with the requisite skills will be a challenge.

Job losses and reskilling
Further, there is concern about job losses. Companies using AI progressively will need to address the issue of handling existing staff, which needs to be reskilled, if possible, or let go. This is a major challenge given that the age barrier often comes in the way of reskilling. Therefore, job losses are bound to mount with progressive use of AI. While it is true that new jobs will be created as AI becomes a part of the curriculum of various courses at the university level, the existing staff would face the threat nonetheless.

Inequality and MSMEs
The second major issue which also comes out in the survey is that of inequality. While large firms will be able to invest and leverage the use of AI, the same will not be possible for the MSMEs, given their limited financial strength. This will further exacerbate the wedge between the two, and there is the possibility of being out-competed in the industry.

On the issue of inequality, it is accepted that those with requisite skills will find takers quite easily, which will also go with much higher remuneration than the conventional roles. It is already seen that the IT sector offers the highest remuneration to engineers compared with any other industry. The same will happen when it comes to the use of AI, as all industries will require these skill sets to design their framework for their operations, which can stretch from manufacturing to customer service.

What do the budget numbers say? Forbes Feb 2nd 2026

 

https://www.forbesindia.com/article/upfront/column/what-do-the-budget-numbers-say/2990998/1

Union Budget 2026 is centered around debt discipline, new sectors, and domestic capabilities in the context of high borrowings and an uncertain global economy

The budget has been drawn up quite cogently, covering all possible aspects in the fiscal space, giving incentives where required, while following the path of prudence. Two things stand out. The first relates to the data points, which raise six interesting issues that will have implications in the medium term. The second is the foresight shown in terms of focusing on emerging sectors, which makes the Budget contemporary in the context of the emerging reality.

First, when the budgetary numbers are examined closely, several issues arise in the context of fiscal consolidation. True, there is a determination to bring the ratio of debt to GDP to 50 percent by 2030. For this, the fiscal deficit ratio has to be lowered, probably to 3 percent eventually, to reach this target. For FY27, the Budget manages things well, with the fiscal deficit ratio being at 4.3 percent, which, however, is only marginally lower than the 4.4 percent of FY26. It must be pointed out that this number would be subject to change when the new GDP series is released, which can have a different number as the denominator when the FY26 figure is revealed.

The number which stands out is the gross borrowing programme of ₹17.2 lakh crore, which is very high, though the net borrowing programme has been pegged at ₹11.7 lakh crore, which is on par with last year. The clue is in the repayments of ₹5.5 lakh crore. This number will continue to be high and will climb as debt taken in the past starts maturing. This means that the market has to be prepared for this tendency and, hence, even low fiscal deficit ratios will result in higher absolute numbers, which have to be financed through market borrowings and other sources like small savings. Therefore, this will be a new normal, and the market should ideally look at the net number to get a realistic picture.

Another number which stands out is the miscellaneous receipts of ₹80,000 crore. This will include both disinvestment and asset monetisation, though in the recent past the focus has been on the latter. But this will be the way forward for the government, and this has also been subtly mentioned in the budget, that assets of public sector units will be put to better use. This will, for sure, be a significant contributor to budgets in the future too and will be reflective of the prevalent ideology.

The third number which stands out is the non-tax revenue component of dividends from banks, FIs and the RBI. Last year, the number was ₹3.04 lakh crore, and it will be ₹3.16 lakh crore in FY27. The contribution of the RBI to this component was very high last year, at above ₹2.6 lakh crore. This indicates that even in FY27, a similar contribution from the RBI would be expected and, going forward, could also become an important component of the budget.

Fourth, on the expenditure side, the interest payments outgo is significant at ₹14.0 lakh crore, compared with ₹12.74 lakh crore last year. This increase is of nearly 10 percent. The broader issue is that progressively, as deficits are incurred, the interest component will increase. Presently, it constitutes 24 percent of the overall Budget of ₹53.5 lakh crore. This is something that future budgets will have to keep in mind, as it does put constraints on other expenditure, since this cannot be compromised. In fact, this can be linked to the overall borrowing of the government, where higher borrowing will lead to higher interest costs too.

Fifth, the budget has increased the STT on both futures and options. But the budget does not see revenue coming down, which means that overall trading will not really decline but continue to be buoyant. Hence, this can be read more as a measure to curtail retail participation than to impose a cost on the long-term investor.

Sixth, the GST collections this year will be subdued, with the compensation cess being withdrawn. This will again be something that will be part of the future budgeting process. Growth in collections will be more contingent on buoyancy in consumption. This is a result of lower GST rates, which have affected revenue in FY26 too, which came in lower by ₹52,000 crore. The ramifications will also be for states when they draw up their budgets, as the two move together.

The other highlight of the budget is the futuristic view taken when focusing on sectors. Quite appropriately, the Budget has looked at rare earths, data centres and waterways. With the global environment changing, there is a need to become more self-sufficient in certain areas, and this is where the rare earths push fits in. Data centres become important when we talk of GCCs (global capability centres), as there are inherent advantages for India which have to be leveraged. The focus on inland waterways is significant, as this potential has not quite been acted upon in the past and, by doing so, can help not just to utilise this resource but also foster the logistics sector.

Hence, this budget has far-reaching announcements, even though there is not much done on the taxation front. However, as explained here, drawing up future budgets will be interesting, given the fiscal targets that have to be achieved.

Budget ticks most of the boxes : Business Line Feb 2 2026

 While budgets are actually financial statements of the government, there are announcements of several measures which tend to affect different sectors to bring about changes in the pace of activity. In fact every measure that is invoked at the taxation level provides incentive for an economic activity like consumption or expenditure. Also there are several policy changes made which are related to the expenditure outlays of the government. Therefore, in a way there are far reaching implications for all announcements made in the Budget. The impact hence can be examined.

First, growth impetus has been stark, with focus on sectors such as MSMEs, rare-earth, data centres, etc. Given that the MSME sector has been affected the most by the recent ongoing tariff issue with US, the creation of a fund for ₹10,000 crore and the other credit guarantee schemes will help them to a large extent. Also the Budget has made allocations for several freight corridors which will help in forging backward linkages with different sectors besides strengthening the State economies. Interestingly the focus on waterways is important as this is probably the first time that we are talking of leveraging this potential.

Second, investment is given a push by the capex of the government. This has increased to ₹12.2 lakh crore which is significant. The government has been doing the heavy lifting for quite some time now and there is always the hope that private investment will follow suit. It has been seen that the overall investment announcements in the first three quarters has been good giving an indication that the cycle is turning around. The prop being provided by the government will help to bring about a further increase in overall investment in the country. There can be positive impetus provided to industries such as steel, cement, engineering in particular.

Book review: Learnings from the doyen: Financial Express 1st Feb 2026

 When one picks up the biography of any celebrity, be it a business person or one associated with showbiz, there is always some apprehension as they tend to be eulogising. This is a similar feeling one gets when picking up this book on Ratan Tata. But here the author, Harish Bhat, who has been associated with the company and also been marketing the brand, writes that Ratan Tata was not perfect and had his shortcomings. However, this book is about the person who headed the empire and expounds on what he stood for, which was remarkable.

The Tata brand today is the most trusted one in the country and this image has been built over years. Ratan Tata not just cemented this, he made it a household name. The book is titled quite appropriately, ‘Doing the right thing’, as this is what Ratan Tata stood for till his last day. All business decisions taken were based on what he thought was right even when it clashed with the ‘profit motivation’. This is something that is not easy.

So, what does doing the right thing mean? It starts with maintaining the Tata legacy so that the values that are the hallmark of the Group remain forever. Second is to put the nation before everything. Third is the ethical conduct of business. This is probably the most challenging thing to do as very often one may have to indulge in corruption or seek political influence to get things done. This is something which was a big ‘no’ for Ratan Tata.

Fourth is doing what is morally right even in case it is legal. Here he gives examples of business deals the Tatas stayed away from even though it had approval in another country because of potential ecological damage. Fifth is the importance placed on being fair to all stakeholders, which was a key to the decision-making process. Here Tata confided that before any decision was taken he would think of the advantages and disadvantages to various stakeholders which also included employees. Sixth was dealing with compassion with employees, and here he was accessible to all. The author narrates his own experience in this respect.

The seventh aspect of doing the right thing is something which should be taught to probably all CEOs, which is showing respect for people. Here Bhat furnishes several examples to show how Tata dealt with employees. Rarely does one come across a leader who has never raised his voice and shown anger even when utterly dissatisfied with the way business has been conducted. This was supposed to be his strong trait which can be a lesson for all leaders. Very often leaders tend to show their power and run down those who report to them. This is something that should be avoided, and this is what Ratan Tata followed all through his career.

Last is meeting every commitment made. Here all are familiar with the Rs 1-lakh car that he had promised. It was a rather bold statement made at that time which looked almost impossible to deliver. But the company did accomplish this task in the shape of the Nano, which made global headlines because of its remarkable costing.

Bhat takes the reader through various instances where these principles of doing the right thing were displayed by Ratan Tata, whose career was long and spanned various economic eras. Creating a Tata identity and brand was probably the highlight because all the companies were working independently when he took over as head of Tata Sons. While changing the logos and creating a single brand identity was a business decision, percolating the principles that he stood for down the line across these companies and administration was an achievement.

n this book, the author picks up these themes and illustrates with examples how Ratan Tata ensured that he went by this playbook. The author also states upfront that these eight qualities that Ratan Tata stood for were from his own perspective. He admits that every individual may have a different view on what doing the right thing is. But this exposition here is more about what Tata stood for, with the examples given by the author supporting the statements.

A view that one can have here is that if all companies draw up their charters on how to do business and follow them to the tee, the world would be a better place. Ironically all companies have a mission and vision statement and also talk a lot of corporate governance. But then these are very broad contours that never define what are the right things to do. Corporate governance is more of a statutory requirement which annual reports tick mark well. But it is when companies are studied over a longer period of time that their character is revealed.

In fact, even today almost all companies talk of what they have done in the context of corporate social responsibility, which is often just paying obeisance to a statutory requirement. The Tata story, told in detail by the author, was motivated long before mandatory CSR came into being.

Reading this book, one would definitely get a feeling that it would be a privilege to work with the Tata Group and, more importantly, to have interacted with Ratan Tata. And for CEOs this may be a good playbook on how to deal with employees and other stakeholders.

Budget delivers well on prudence and focuses on the future thrust areas: Business Standard 1st Feb 2026

 This year’s budget was eagerly awaited for two reasons considering that not much was expected on the taxation front as the major reforms were implemented last year. The first is the policy or reforms push, given that while the Indian economy has done very well, the external environment continued to be uncertain. In fact, as pointed out by the Economic Survey, this was a paradox in the system with a very good economy coexisting with a rather volatile rupee. The second is the direction of the fiscal deficit which is basically the arithmetic of the budget which would flow from the various reforms or policy measures. 

Starting backwards with the numbers, the budget shows that the dominant ideology driving the content was prudence. This comes out from the fact that the government is targeting a fiscal deficit ratio of 4.3 per cent this year, and hence we seem to be on the path of targeting the debt-to-GDP ratio of 50 per cent in the near-term though would be at 55.6 per cent this year. 

 

The fiscal deficit involves a gross borrowing programme of Rs 17.2 trillion and a net borrowing of Rs 11.7 trillion. It would need to be seen how the market reacts because the gross borrowing programme is higher than last year, though the net claim on the market is the same. This has been necessitated by the higher redemptions falling this year.  As was seen for FY26 the state borrowings also matter when it comes to bond yields.

Further, the growth in nominal GDP has been assumed at 10 per cent, which appears realistic this time as the low base effect of FY26 will translate into a higher number this year. Assuming the economic survey growth of 6.8-7.2 per cent in real GDP as the underlying, inflation will be at 2.9-3.2 per cent in terms of the GDP deflator, which may tend to indicate average CPI inflation of closer to 4 per cent plus. While these numbers will change once the new base gets known, there may not be too much room for further rate cuts in this scenario. Also given the larger borrowing programme, a wait-and-watch approach may be preferred by the monetary policy committee (MPC).

The social welfare programmes have been well targeted as can be seen from the allocations for farmers and employment, which are the two big allocations for the government. Alongside, the government appears steadfast in its commitment to capex with an outlay of Rs 12.2 trillion. While there are signs of private sector capex picking up, so far the government has been the main driver and this is where the allocations across segments matter. 

The financial sector could be seeing some major reforms post the setting up of a committee that will review the system and offer recommendations. The permission to have market makers in the bond market would augur well and one can expect activity to increase. 

On the policy front the focus has been on agriculture, industry, MSMEs and exports, with several interlinkages being leveraged by the budget.  The new areas which have been included in specific allocations are rare earths, freight corridors, waterways and data centres. This would help in making more self-sufficient in the long run for rare earths, while the advantage of supporting data centres will enable India to become an effective player in the area global capability centres.

 

The budget hence delivers well on prudence and focuses more on the future thrust areas thus bringing in not just novelty but pragmatism.  

A comprehensive account & a peek into the future: Financial Express 3-th Jan 2026

 

This is important as Indian bonds are now part of global indices and investor decisions get impacted on this score. The clear signal is to be more mindful of deficits and borrowings.

The voluminous Economic Survey is an omnibus on the state of the economy and cogently covers all aspects and suggests the way forward. So, what are the main messages?

The first is that the Indian economy is on a strong path and the potential growth rate is now 7% in the medium term. This comes notwithstanding the external pressures which have been countered to an extent by the strong growth of 7.4% in FY26.

For FY27 growth has been placed at 6.8-7.2% which will probably be used when drafting the budgetary numbers.

Second is a paradox placed by the CEA in this document. The strong growth witnessed has :collided” with the global system which has been typified by not just tariffs but different monetary policy regimes.

This has put stress on capital inflows thus resulting in volatility in the currency with the rupee going down relative to the dollar. This is again an anomaly as the forex reserves have risen and the import cover is high in the double digits.

Fiscal Debt Targets

Third, on the fiscal side, the Survey buttresses the need to move towards the 50% debt to GDP mark which means that the upcoming budget will definitely target a lower deficit ratio for FY27 relative to FY26 as this is the only way of lowering the debt ratio.

Fourth, on the fiscal health of states, there have been some concerns raised on revenue deficits increasing because of indiscreet expenditure allocations made by various state governments. The broader issue raised is the pressure put on bond yields.

This is important as Indian bonds are now part of global indices and investor decisions get impacted on this score. The clear signal is to be more mindful of deficits and borrowings.

Fifth, with little space to cut outlays on salaries or pensions, the discretionary item of subsidies has been highlighted in the Survey which is what the government should focus on rationalizing. It will be interesting to see if the Budget does prune these numbers for FY27.

Embracing Artificial Intelligence

Sixth, unlike the 2024-25 Survey when there was some caution shown on AI, this time the merits have been spelt out. The inevitability of this phenomenon has brought about the change in stance and the advantages of being a late starter have been highlighted so that various sectors can build their strategies.

Seventh, the Survey has highlighted the critical role played by services in the economy and focuses on reskilling especially in the IT sector. While skill development has been emphasized even in the past in general terms, this is probably the first time that the IT sector has been brought to the forefront.

Eight, the PLI scheme has been acknowledged as a success in manufacturing. But now, the Survey talks of building scale to move away from an ideology of import substitution to becoming part of global value chains.

Ninth, the importance of FDI has been focused on and a recommendation also made on providing incentives as is done in other countries is suggested.

Last, which probably is very relevant, is that the domestic market is the biggest asset for the economy and it is in this context that the reforms should be viewed which have given a thrust to both consumption and investment.

The Survey hence provides a very good balance sheet of the economy where the strengths are highlighted as well as the areas which need to be worked on and hence needs to be commended.

India on a strong plank to show sustained growth in uncertain times: Business Standard 29th January 2026

 The Economic Survey is more of a qualitative appraisal of the Indian economy that delves deeper into what has driven various economic variables during the year. Being announced before the budget, it suggests a path that should be taken to achieve medium-term goals.

 The starting point has been the gross domestic product (GDP) growth forecast for fiscal 2026-27 (FY27), which has been put in a range of 6.8-7.2 per cent. This can be bordering on being conservative as the performance in FY26 has been good at 7.4 per cent notwithstanding external headwinds. But this number is crucial for the formation of the budget, where it can be expected that the nominal growth will be taken as around 10 per cent, which is similar to what was proposed in the FY26 Budget. 

The Survey rightly points at three areas that need to be addressed through the course of the year. The first is consumption that has shown signs of picking up post goods and services tax (GST) rationalisation. This will have to be maintained through the year to ensure that growth keeps ticking. 

 

The second is investment, especially from the private sector. Here, too, there are some signals that this may have picked up this year, though may not yet be broad-based. But this engine has to fire to ensure that the growth momentum is maintained. The Survey is talking of potential growth of 7 per cent for India in the medium-run, which will need both these to increase. 

The third is specific to infrastructure, which is both an opportunity and challenge. The opportunity comes from the scope that exists in all areas starting from roads to social infrastructure. The challenge is twofold – funding these projects as well as project execution. 

 

By achieving these objectives, the economy will be able to withstand the global headwinds which has added a lot of uncertainty to the environment. This had a strong bearing on our external account as evidenced by both a weakening rupee as well as rather volatile foreign investment flows. It has also been pointed out that the foreign portfolio investor (FPI) flows have been diverted to an extent to AI-related investment opportunities in the USA, Taiwan and Korea. 

Further, divergent policies by central banks across the world has led to investors changing direction often depending on various regimes. The survey, however, has also highlighted the external strength of the economy as evidenced by high import cover as well as low current account deficit. 

 

The positive factors highlighted by the survey refer to the series of reforms undertaken on the fiscal front as well as on the labour front, which has provided support to the growth process. Also, the fact that the government has signed several free trade agreements (FTAs) is a big positive for the industry in particular, as well as exports as their consummation will help companies to reap the benefits. The European Union (EU) FTA, in particular, is important as it is the largest trading partner for India. 

An interesting suggestion put forward has been on subsidies. The Survey says that subsidies and other discretionary spending has to be rationalised to contain overall revenue expenditure covering salaries, pensions, interest rates. One can expect some measures to be taken in the Budget to be announced on 01 February. 

 

On the whole, the Survey paints a positive picture for the economy as well as outlook, though cautions more on the external environment, which can continue to be slippery and can cause uncertainty. The strong reforms package introduced as well as strength of the domestic economy would mitigate these challenges – is the message that one can take.

View on what to expect from the Budget on Times Now. 25th Jan 2026

 https://www.timesnownews.com/videos/times-now/specials/budget-pe-charcha-ep-6-madan-sabnavis-on-why-sitharaman-should-prioritise-prudence-over-populism-video-153504126

Merits of user tax on infra services : Business Line: 22nd January 2026

 Raising revenue has always been a challenge for a government. It is hard to raise direct tax rates, as it is said to come in the way of spending power. Besides, the government has been lowering income and corporate tax rates over the last decade or so. As for indirect taxes, the GST is outside the ambit of the Budget, but rates were separately lowered by the Council last September. Any talk of increasing taxes on goods and services can lead to inflation fears. At the same time industry, economists, market experts want more spending on infrastructure. Can one think of a different way of partly funding infrastructure through a separate tax?

This is where a new system of taxation can be introduced based on the principle of ‘multiple of 10’ where this number is applied as a special charge on various goods and services in infra space. It has been seen that an increase in cost has seldom been a limiting factor for use of services such as travel or even telecom services. The same holds for purchase of vehicles. Similarly, goods have to be transported irrespective of the cost involved as this can be partly passed on to the user. There can however be a price impact which can be examined separately.

It is, therefore, possible to design a cess or surcharge on goods and services associated with infrastructure that is not a burden on the user, but at the same time yield considerable revenue to the government, given the large number of users. The Table gives the potential revenue that can be garnered by just imposing this charge which can be called a tax, cess or surcharge on certain infra-related goods (vehicles used as a proxy for roads) and services based on volumes observed in FY25 or FY26 for them.

Price inelastic

What to expect from the Budget: Financial Express 20th January 2026

 

Union Budget 2026: Prudence, not populism, will be underlying theme to build Bharat: ETonline 19th January 2026

 https://www.msn.com/en-in/money/unionbudget2017-18/union-budget-2026-prudence-not-populism-will-be-underlying-theme-to-build-bharat/ar-AA1UumQC

Vehicles of Ambition: Book review in Financial Express of The Stoic Capitalist: 18th January 2026

 

Budget And Credit Policy: What To Expect In A Testing Fiscal Year: Free press Journal: 9th January 2026

 

As the Union Budget and RBI’s final credit policy for FY26 approach, attention will focus on fiscal deficit targets, capex growth, disinvestment plans and GDP assumptions. With limited scope for tax relief and a possible final rate cut ahead, policymakers face a delicate balance between growth and stability.

With the new year starting, the two immediate policies that are awaited are the budget and the credit policy. The credit policy will come just after the budget is announced and will also be the last one for FY26. The budget will come just after the FOMC meeting, and while it has no bearing on its content, the RBI will also pay attention to what the Federal Reserve has in mind. What can one expect from these policies?

Fiscal deficit path under focus

The budget to be presented will be special for several reasons. The first is that the path of the fiscal deficit will be tracked. Post-Covid, there has been a tendency for the deficit to be rolled back. While a 3% ratio is the ideal level, it is not possible to do so at one stroke and has to be done in a phased manner.

Second, this budget will also have to keep in mind the impact of the possible recommendations of the Pay Commission. While the direct impact will not be in FY27, a call has to be taken on whether provisions have to be made for the arrears component as and when the new dispensation is enforced. Third, there has to be internal discussion on the free food project, which is set to end by December 2028. A plan to roll back the same has to be put in place.

Support for exporters amid tariff backlash

Fourth, addressing the immediate concerns of exporters on account of the tariff backlash has to be provided for. It is expected that a trade deal will be signed by the end of March 2026, which will give space for the budget to address these concerns. Therefore, more than numbers, it is the ideology that will be of prime importance.

Nominal GDP assumptions crucial

What specifically will economists be looking for in this budget? To begin with, the assumptions on nominal GDP growth will be of interest. FY26 has been quite different from earlier years, with very low inflation, thus bringing about a virtual convergence between real and nominal GDP growth rates. This becomes important since the fiscal deficit ratio depends on the nominal GDP value.

If the ratio is to be lowered, then the fiscal deficit has to be lower if nominal GDP growth remains in single digits. Normally, nominal GDP growth of around 11% is assumed, which allows scope for a higher deficit value while still maintaining a lower fiscal deficit ratio. The growth assumed in the budget sets the tone for the implicit GDP growth, on which the Economic Survey usually offers guidance.

Capex constraints and expectations

Another major area of focus is government capital expenditure. At around Rs 11 lakh crore in FY26, capex accounts for a little over 20% of the total budget size. While the budget size grows annually by 5–10%, it may not always be possible to raise capex proportionately. Capacity constraints in project execution and completion are key reasons why capex targets are often not met at both central and state levels. An increase of not more than Rs 1 lakh crore can be expected.

Disinvestment and asset monetisation

The third area of interest will be disinvestment and asset monetisation, which have become increasingly important for budget formulation. Tax collections are constrained by GDP growth, making non-tax revenues and RBI transfers critical in determining overall fiscal space.

Limited scope for tax relief

Certain measures are unlikely, particularly in individual taxation. The government has already rationalised tax rates, especially for lower income groups in FY26, and is unlikely to provide further relief. However, there may be scope for tax benefits on interest income from bank deposits, given the slowdown in such savings. There is also a strong case for harmonising tax structures for debt and equity returns.

GST and customs duty outlook

On the indirect tax front, with GST 2.0 being implemented, there is limited scope for further changes. Attention will instead focus on potential changes in customs duty structures, especially in light of trade deals with the US and other countries that are signed or under negotiation.

Borrowing pressures ahead

The fiscal deficit level will indicate net borrowing for the year. FY27 will see redemptions of Rs 5.5 lakh crore, rising sharply to nearly Rs 9 lakh crore by FY31. This will test the market’s ability to absorb increasingly large government borrowings.

Credit policy outlook

Following the budget, the credit policy will be announced. Inflation and growth targets are unlikely to differ significantly from the December policy. One more rate cut, bringing the repo rate to 5%, may be expected, but this could mark the end of the easing cycle as inflation rises to the 4–4.5% range due to base effects.

The key challenge will be how policymakers respond to potentially lower GDP growth in FY27 compared to FY26. The limits of rate cuts in stimulating growth will be tested both at the policy level and on the ground.

Inflation has been low. That’s not necessarily a good thing: Indian Express 6th January 2026

 For two successive months, inflation has come in at less than 1 per cent. What are its implications for the economy? First, the low CPI inflation rates are in part due to the statistical base effect of high numbers last year. Households are not too convinced about low inflation. The RBI surveys on inflation perception reveal that in November, households put inflation at 6.6 per cent and the three months ahead rate was 7.6 per cent. While these numbers are lower than in the previous survey rounds, these figures do show that perceptions are quite different on the ground.

Second, these numbers are a conundrum for the RBI when it comes to interest rates. In December, when the MPC lowered the repo rate, inflation was low and growth very buoyant. In February, when the committee will deliberate again on rates, the situation will be the same. Inflation will remain low — the December number is likely to be less than or around 1 per cent. Logically, rates should be lowered again. But what will happen when inflation rises because of the low base effect? Will rates be increased?

Third, low inflation is a cause for concern because when food inflation is negative, farmers could be getting lower income even though production was very good for the kharif crops. This has ripple effects. If rural incomes are impacted, rural spending power gets constrained, and the benefits of GST 2.0 could likely dissipate. It has been reported that for crops like soybean and pulses, sales were reckoned lower than MSP in October and early November.

Fourth, from the point of view of manufacturing, low inflation, especially on the wholesale side, is not good news as it also means diminishing pricing power. While higher output is a major contributor to profits for companies, prices matter. In the case of CPI as well, the core component witnessed higher inflation mainly due to products like gold. It is low for manufactured products. All this means that there has also been some erosion in pricing power, which can be a challenge if it persists.

Fifth, lower inflation has already caused some slowing down of GST collections. Collections have also been impacted by lower tax rates.  The question is, will growth in tax revenues persist with persistently low inflation?

Sixth, low inflation has led to a situation where nominal GDP growth has tended to be only marginally higher than real GDP as against an average difference of 3-4 percentage points in the past. Low nominal growth poses a challenge for meeting the fiscal deficit targets. It would be interesting to see what nominal growth number is used when projecting fiscal numbers for FY27.

Low inflation thus has different implications for different players. Some sections of households may benefit, while some producers may be adversely impacted. The minimum amount of inflation that is needed to keep the economy ticking is around 4 per cent in our case — the target for monetary policy.