R. Dinesh, Executive Chairman of TVS Supply Chain Solutions and former President of the Confederation of Indian Industry, has outlined a comprehensive vision for Budget 2026, emphasizing the need to consolidate recent economic gains and accelerate India's growth trajectory. According to Dinesh, the upcoming budget presents an opportunity to develop measurable outcomes and effective delivery mechanisms while building on significant policy reforms.

Economic Formalization Shows Strong Progress

Recent tax and policy reforms have demonstrated substantial impact on India's economic formalization. The GST system has shown remarkable growth, with collections more than doubling over a four-year period.

Dinesh notes that this growth represents "clear evidence of deeper formalization of the economy" rather than merely revenue expansion. The GST reforms implemented in September 2025 have simplified what was previously a complex system.

Infrastructure Investment Maintains Momentum

Infrastructure spending has continued its upward trajectory, with investment rising 11% to reach ₹11.11 lakh crore, maintaining capital expenditure at 3.4% of GDP. Dinesh emphasizes that as this scale of spending continues, the focus must shift from capacity creation to debottlenecking and efficiency gains.

The PM Gati Shakti data, announced in the previous budget, now provides visibility to investors and users as a planning tool. This system helps identify where removing bottlenecks can deliver the quickest returns across ports, airports, connectivity infrastructure, and first- and last-mile logistics networks.

Global Supply Chain Integration Strategy

To enhance India's integration into global supply chains, Dinesh proposes creating mechanisms for Indian companies to acquire overseas manufacturing capacity. He suggests establishing a dedicated sovereign-backed vehicle or a focused fund under the National Investment and Infrastructure Fund.

The automotive aftermarket presents a significant opportunity, with India currently holding approximately $3 billion of an estimated $300 billion global market. A ₹1 lakh crore fund for R&D and innovation, provisioned in the previous budget, is now being operationalized to enable Indian companies to acquire overseas intellectual property and technology capabilities.

Employment Generation and Skill Development Focus

The Employment Linked Incentive (ELI) scheme provides a foundation for job creation by linking employment generation with formalization and skilling. Dinesh advocates for prioritizing specific sectors that offer high employment potential.

He recommends focused certification and upskilling through National Skill Training Institutes (NSTIs), with a target of enabling at least 100,000 jobs in logistics and tourism sectors. This approach would translate policy intent into measurable outcomes.

MSME Support and Industry Collaboration

Micro, small and medium enterprises continue serving as the backbone of job creation, supported by multiple schemes with increased funding. Dinesh suggests coordinated cross-functional collaboration with industry bodies such as CII and sectoral Centres of Excellence to improve connectivity with MSMEs.

This collaboration would help align initiatives more closely, enable large corporates to support MSMEs, and translate policy intent into measurable growth and employment outcomes.

Business Process Reforms and Global Competitiveness

Dinesh emphasizes evaluating policies through two key lenses: ease of doing business and cost of doing business. As India integrates more deeply into the global economy, he calls for benchmarking processes such as mergers, demergers, and acquisitions against global best practices to achieve world-class timelines.

The finance minister's recent references to customs and trade facilitation reforms are particularly relevant as global supply chains continue reconfiguring. Beyond rate rationalization, Dinesh advocates for deeper digitization and technology-led processes that speed up approvals and clearances to strengthen India's competitiveness.

Tax policy experts have presented comprehensive recommendations for Budget 2026 to enhance India's mergers and acquisitions environment, particularly with the Income-tax Act, 2025 scheduled for implementation from April 1, 2026. The suggestions aim to address existing regulatory gaps and improve the ease of doing business for M&A transactions.

Fast-Track Demerger Tax Neutrality

A primary recommendation involves extending tax neutrality to fast-track demergers under Section 233 of the Companies Act, 2013. Currently, the Income-tax Act, 2025 provides tax neutrality only to NCLT-approved demergers under Sections 230 to 232, excluding fast-track demergers that enable small or closely held companies to undertake demergers without court approval.

The finance ministry's rationale for excluding fast-track demergers centers on concerns about potential valuation manipulation without court oversight. However, experts argue this approach contradicts the ease of doing business agenda, forcing genuine taxpayers to choose between transaction efficiency and tax benefits.

Contingent Consideration Clarity

Experts emphasize the need for clear taxation guidelines on earn-out, profit-linked, or contingent consideration arrangements that have become increasingly common in M&A transactions. These arrangements tie part of the sale consideration to achieving specific profitability or financial milestones.

The current legal framework lacks clarity on:

• Taxability of contingent payments
• Timing of taxation for such arrangements
• Treatment of milestone-based considerations

Foreign Company Merger Anomalies

The recommendations address existing inconsistencies in foreign company merger taxation. While foreign companies enjoy capital gains tax exemptions on direct or indirect share transfers during mergers with other foreign companies, shareholders of the amalgamating company face potential capital gains liability on share swaps.

This creates an anomaly compared to domestic mergers, which provide exemptions at both company and shareholder levels.

Capital Gains Tax Rate Concerns

The recent capital gains tax regime rationalization introduced higher long-term capital gains tax rates, which experts suggest adversely impacts investor returns and exit efficiency. The increased rates potentially drive investors toward jurisdictions with more favorable tax regimes.

Key concerns include:

• Reduced post-tax returns for investors
• Decreased competitiveness with other investment destinations
• Impact on foreign capital attraction

Experts recommend reducing capital gains tax rates, suggesting restoration of the earlier 10.00% rate to improve India's competitive position in attracting foreign investment.

Strategic Implementation Timeline

With the Income-tax Act, 2025 set for April 1, 2026 implementation, Budget 2026 represents the final opportunity to incorporate these amendments before the new framework takes effect. The recommendations aim to position India as a preferred destination for cross-border M&A activities while maintaining regulatory integrity and supporting corporate growth objectives.