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.