Following the Union Budget 2025's sustained focus on climate and sustainability initiatives, Budget 2026 is expected to further accelerate India's transition toward its 2070 Net-Zero commitment. The previous budget included measures advancing clean-tech manufacturing, renewable energy adoption, sustainable agriculture, urban development, nuclear power development, and electric mobility.

Renewable Energy and Storage Infrastructure

Energy transition remains central to India's decarbonisation strategy, with the next phase requiring enhanced focus on storage and transmission solutions. While renewable capacity additions have shown encouraging progress, Budget 2026 is anticipated to deepen support for battery manufacturing and storage scalability.

The government's push for rooftop solar installations received increased funding, and further allocations are expected to support accelerated adoption rates. Potential mechanisms for storage solution incentivisation may include tax benefits, inclusion under PLI schemes, mandated storage requirements, or enhanced financing support.

Climate Finance and Market Mechanisms

The development of sustainable finance frameworks demands heightened attention in the upcoming budget. Key anticipated measures include:

• Climate Finance Taxonomy: Operationalisation to enable credible green finance and reduce greenwashing risks
• Financial Incentives: Support for green, social, and sustainable instruments through preferential capital treatment and concessional interest rates
• ESG Disclosure Norms: Basic requirements for MSMEs and private players to improve market access
• Carbon Market Support: Clear pricing architecture and robust monitoring, reporting, and verification norms

These mechanisms aim to strengthen India's Carbon Credit Trading Scheme and support industries in meeting decarbonisation targets.

Critical Minerals and Circular Economy

Resource security through critical minerals represents an emerging strategic priority. The National Critical Mineral Mission saw significant expansion in the previous budget.

Budget 2026 is expected to further accelerate this mission, given the importance of critical minerals and rare earth metals to manufacturing value chains. Circular economy initiatives are anticipated to receive enhanced support through expanded Extended Producer Responsibility frameworks and inter-industry collaboration platforms.

Urban Development and Infrastructure

Climate adaptation measures are expected to receive continued emphasis through urban resilience initiatives.

These allocations support climate adaptation alongside economic growth and water infrastructure development, with continued focus on irrigation and flood mitigation measures.

Technology and Innovation Focus

Technology and innovation remain fundamental to India's climate transition. Early-stage pilots in carbon capture, utilisation and storage, green hydrogen, and alternative fuels demonstrate emerging technology potential. Budget 2026 is expected to continue supporting R&D initiatives, particularly in energy-efficient and low-carbon industrial processes, requiring targeted investment and accelerated commercialisation pathways.

Markets may appear volatile, but the current phase should be viewed as consolidation rather than a sign of deeper stress, according to Prashant Khemka, founder and MD of WhiteOak Capital Management. In an exclusive conversation with Moneycontrol, he outlined his expectations for the upcoming Union Budget and long-term market outlook.

Budget Focus on Structural Reforms

Khemka believes markets are less concerned about near-term earnings support and more focused on long-term intent from the Union Budget. He argues that incremental tax tweaks or sector-specific incentives may deliver only fleeting rallies, while investors are watching for a clear structural roadmap.

"What investors are watching for instead is a clear structural roadmap," Khemka emphasized, highlighting the market's preference for sustainable policy direction over short-term stimulus measures.

Three Key Priority Areas

Defence Spending Enhancement

Khemka identified sharply higher defence spending as a critical priority, noting that current expenditure remains around 2.00% of GDP. He advocates for substantial increases in defence allocation to strengthen strategic infrastructure.

"We need to substantially ramp up our defence budget. It has been stuck at around 2.00% of GDP for quite some time. While India has spent heavily on physical infrastructure, defence is the most critical form of infrastructure," he stated.

Given India's geopolitical position and regional challenges, Khemka suggests the country should be at the higher end of the 4.00-5.00% range that many countries globally are targeting.

Semiconductor Self-Reliance

The second priority focuses on reducing dependence on a handful of countries for critical imports, particularly semiconductors. Khemka highlighted India's significant lag in this sector, describing the country as "30 years behind in semiconductors, if not more."

"While initiatives such as the PLI scheme have helped us make a start over the past two to three years, what is needed is a massive push," Khemka explained. He advocates for government-backed semiconductor efforts, acknowledging that private capital alone may not bridge the existing gap.

Business Environment Reforms

The third priority involves deeper reforms to ease of doing business, particularly addressing land acquisition challenges and regulatory complexity. Khemka views these structural changes as essential for long-term economic growth and competitiveness.

Market Outlook and Performance

After delivering exceptional returns following the Covid-19 lows, Indian equities have largely moved sideways for the past 15-18 months. Khemka describes this period as "disappointing but normal," cautioning against over-interpreting short-term market movements.

Earnings Growth Expectations

Khemka expects FY26 earnings growth to remain in high single digits, with FY27 likely tracking nominal GDP growth in the low double digits. While near-term visibility remains mixed, he believes markets will reward credible structural reform even without immediate earnings upside.

"Markets don't follow the calendar," he noted, emphasizing that past returns offer little insight into future performance. His outlook suggests that sustainable policy reforms will drive long-term market performance more effectively than short-term fiscal measures.

Source: https://www.moneycontrol.com/news/business/markets/budget-should-explain-governments-long-term-structural-road-map-prashant-khemka-whiteoak-capital-13787859.html