Jaspreet Singh Arora, Chief Investment Officer at Equentis Wealth Advisory Services, expects the upcoming Union Budget to be reform-oriented within tight fiscal constraints, projecting an 11-13% increase in capital expenditures. He anticipates a "continuity budget" that reinforces existing successful policies while pushing India toward becoming a manufacturing powerhouse.

Budget Expectations and Fiscal Strategy

Arora expects the government to pause further fiscal consolidation, maintaining the deficit near 4.4% of GDP while re-orienting spending toward capex and development outlays. The budget is likely to focus on:

• Manufacturing incentives: Enhanced support for AI and semiconductors
• Sunrise industries: Major push for defence, electronics, AI, nuclear energy, and critical minerals through PLI schemes
• Long-term fiscal health: Targeting debt-to-GDP ratio reduction from 81% currently to about 50% by FY31

Market Challenges and Global Factors

According to Arora, President Trump's tariff policies represent the foremost short-term threat to equity markets, triggering widespread global trade disruptions. This has resulted in significant foreign institutional investor (FII) selling, with over Rs 40,000 crore offloaded from Indian markets in January 2026 alone. The rupee's depreciation to record lows near 91.97/USD has further intensified capital flight and increased importer hedging costs.

To counter tariff impacts, the government is pursuing a "diversify and defend" strategy, including fast-tracking trade deals with the UK, Oman, and the anticipated EU agreement. The Export Promotion Mission with an outlay of Rs 25,060 crore is being introduced to mitigate tariff impacts.

RBI Policy Outlook

Arora believes the RBI will prioritise liquidity support and rate transmission over outright monetary easing in its February policy meeting. Despite approximately 125 basis points of cumulative cuts, 10-year G-sec yields have barely declined, indicating weak transmission. Current market assumptions point to only a terminal 25 basis point cut.

The central bank has stepped up open market operations and conducted variable rate repo auctions to manage tight system liquidity, while using USD/INR swap windows to offset liquidity drains from forex market interventions.

Sector-Specific Outlook

For the IT sector, Arora considers this an opportune time for accumulation, with Nifty IT valuations at a reasonable P/E of around 27x, down from December 2024 peaks of 37x. AI-driven deal ramp-ups are gaining pace, and analysts forecast 6-8% USD revenue growth into FY27, significantly ahead of prior consensus estimates of 3-4%.

Regarding targeted relief measures, markets are not expecting massive giveaways but rather focused support through tax credits and incentives for MSMEs and export-heavy sectors affected by tariff pressures.

Industry leaders across multiple sectors are presenting a unified agenda ahead of Union Budget 2026, emphasizing infrastructure continuity, tax system efficiency, and enhanced financial protection mechanisms. The convergence of expectations reflects broader economic priorities as businesses seek policy stability and growth enablers in an evolving market landscape.

Infrastructure Investment Remains Growth Priority

Industry executives continue to position infrastructure development as the cornerstone of economic expansion and private investment confidence. The real estate and asset management sectors particularly emphasize the multiplier effects of sustained public capital expenditure.

Prakash Patel from Bhumi World highlighted how improved connectivity strengthens office and retail demand while enhancing mixed-use destination attractiveness. Gurvinder Juneja of Fortuna Asset Managers noted that infrastructure investments improve productivity and crowd in private capital when supported by credible fiscal consolidation.

Tax System Reforms and GST Efficiency

Tax predictability and compliance simplification have emerged as common demands across sectors, with particular focus on GST administration and customs procedures. Industry leaders are seeking resolution of structural issues that impact working capital and investment flows.

Manoj Mishra from Grant Thornton Bharat emphasized the need for resolving valuation disputes, place-of-supply issues, and blocked credits to sustain private investment. The insurance sector specifically highlighted GST relief for MSMEs to expand employee coverage and reduce public healthcare dependence.

Insurance and Retirement Solutions

The insurance industry is advocating for strengthened protection frameworks and retirement solutions to address demographic shifts and rising longevity. Leaders are seeking tax parity and enhanced adoption mechanisms for long-term savings products.

Key insurance sector priorities include:

• Aligning annuity taxation with pension instruments
• Simplifying tax parity across insurance products
• Encouraging annuity market adoption through tax relief
• Supporting technology-led underwriting and claims systems
• Addressing climate risks and catastrophe losses

Tarun Chugh from Bajaj Life Insurance positioned life insurance as a long-term savings solution, while Subhrajit Mukhopadhyay of Edelweiss Life Insurance emphasized deepening the annuity market to channel long-term savings into duration investments.

Financial Inclusion and Fintech Evolution

Financial services leaders are emphasizing balanced growth with enhanced safeguards, consumer protection, and technological advancement. The focus has shifted toward capability-centered models rather than purely growth-driven approaches.

Vivek Iyer from Grant Thornton Bharat advocated for stronger liquidity buffers and improved cybersecurity frameworks. Digital lending stakeholders emphasized maintaining growth while ensuring regulatory alignment and consent-based data-sharing frameworks.

Real Estate and Housing Affordability

Real estate developers continue to highlight affordability constraints despite resilient market demand. The sector is seeking targeted interventions to reduce cost pressures and support supply in affordable housing segments.

Developers are requesting:

• Targeted tax relief for homebuyers
• GST rationalization on construction materials
• Simplified stamp duty procedures
• Review of environmental regulations
• Execution-focused affordable housing initiatives

Sector-Specific Considerations

Various industries have presented specialized requirements reflecting their unique operational challenges. The travel sector seeks digital-first financing solutions and regulatory clarity, while forex stakeholders advocate for exempting education-related remittances from tax collected at source.

The manufacturing sector, particularly sugar industry representatives, expects continued policy support for ethanol blending, timely farmer payments, and green modernization incentives to improve sector resilience while supporting rural livelihoods and energy security.