Sunny Agrawal, Head of Fundamental Research at SBI Securities, anticipates that Budget 2026 will emphasize fiscal consolidation, capex-driven growth, and ease of doing business initiatives. His outlook suggests the upcoming budget for financial year 2026-27 could deliver significant infrastructure spending while maintaining fiscal discipline. However, he expects a post-budget market rally only if the government introduces measures to attract capital from foreign institutional investors and domestic investors.

Key Budget Expectations

Agrawal outlines three primary expectations for Budget 2026 amid the challenging geopolitical environment:

The government may increase capital expenditure spending by 10-12% for FY27 based on the revised target of FY26. For FY27, the annual capex spend target can exceed the ₹12 trillion mark, with any significant jump from this threshold potentially acting as a major economic boost. The budget is also expected to continue the fiscal deficit glide path as a percentage of GDP, which was pegged at 4.4% for FY26.

Market Positioning and Investment Strategy

Agrawal notes that the Union Budget's importance as the sole window for reform measures has diminished over recent years, with reforms becoming a continuous process. Budget documents now primarily help investors understand the government's focus areas for the next 12 months. Post-budget rally prospects depend on multiple factors including December quarter earnings season, whether the budget meets market expectations, and resolution of headwinds like Indo-US trade deals.

Sectoral Outlook and Opportunities

Several sectors are positioned to benefit in the run-up to Budget 2026:

Strong December Quarter Performance Expected:

• Non-Banking Financial Companies (NBFCs)
• Public Sector Banks
• Mid-sized private banks
• Automobile and auto ancillary companies
• Metals and Oil Marketing Companies
• Consumer discretionary sector

Budget-Sensitive Sectors:

• Real Estate and Housing Finance
• Railways and Defence
• Infrastructure-dependent industries

Fiscal Targets and Tax Policy

Regarding personal income tax relief, Agrawal expects minor benefits rather than major reforms. After significant tax breaks in the previous Union Budget, this budget may focus on making the new tax regime incrementally attractive through measures like increased standard deduction limits. The FY26 fiscal deficit target of 4.4% of GDP is likely achievable despite potential shortfalls in indirect tax collection, which will be offset through reduced expenditure in select ministries.

For FY27, the government may target a fiscal deficit closer to 4.2-4.4% of GDP with focus on the debt-to-GDP ratio. The IDBI Bank divestment, currently in advanced stages, should boost the FY27 divestment target, though the FY26 target may be missed due to weak market sentiment.

India's insurance sector has presented comprehensive expectations for the upcoming Union Budget 2026, focusing on regulatory reforms and policy measures to accelerate growth and market penetration. The industry seeks structural changes including composite licensing, tax rationalization, and risk-based capital frameworks to optimize operations and enhance accessibility.

Sector Performance and Growth Trajectory

The insurance sector has demonstrated consistent growth over the past decade, driven by regulatory liberalization, digital acceleration, and increased financial awareness. The Insurance Regulatory and Development Authority of India (IRDAI) reports significant expansion in the sector's financial metrics:

The IRDAI has implemented several structural reforms contributing to this growth, including the introduction of the "use and file" product regime in 2016, simplified licensing norms in 2024, and the liberalization of FDI to 100 percent in 2025. These measures have enhanced operational flexibility and eased market entry for insurers.

Key Budget Expectations

Composite Insurance Licensing Framework

The industry prioritizes the expedited implementation of IRDAI's composite licensing regime, which would allow unified operations across life, non-life, and health segments under a single license. This framework aims to:

• Optimize resource utilization and reduce Expenses of Management (EoM)
• Enable cross-selling opportunities across product lines
• Improve overall risk management capabilities
• Implement clear prudential safeguards with fund segregation

GST and Tax Benefits Rationalization

Specific tax-related measures requested include:

• Exemption or zero-rate GST on insurance agent commissions
• Full Input Tax Credit (ITC) allowance on distribution expenses
• Enhanced deductions for term and health insurance under Section 80D
• Creation of new section for comprehensive insurance premium benefits

Risk-Based Capital Framework

The sector advocates for capital requirements aligned with company risk appetite, particularly for organizations focusing on micro-insurance and affordable products for rural and semi-urban areas. This approach would provide calibrated capital incentives and corporate rebates for targeted market segments.

Policy Recommendations

Climate and Parametric Insurance Incentives

The industry recommends establishing sovereign reinsurance backstops or co-funding guarantees for climate-linked and parametric insurance pilot schemes. This initiative would:

Technology and Skill Development Support

Recommendations include R&D incentives for insurers adopting AI, IoT, and alternative data for underwriting and fraud detection. The proposal encompasses creating a joint public-private Insurance Data Exchange Hub integrating various data sources under privacy-preserving architecture.

Health Claims Transparency

The sector seeks enhanced oversight mechanisms for hospital pricing and integration of the National Health Claims Exchange (NHCX) with direct audit trails. Key objectives include:

• Faster settlement processes between insurance companies and hospitals
• Introduction of penalties for delayed settlements
• Continued focus on rapid claims settlement
• Enhanced transparency in the claims ecosystem

These comprehensive expectations reflect the industry's commitment to achieving the government's "Insurance for All by 2047" vision while addressing the substantial protection gap in health, life, and catastrophic event coverage across the country.