Rajiv Memani, President of the Confederation of Indian Industry (CII), has set realistic expectations for the upcoming Budget, suggesting that major tax concessions are unlikely as the government has already delivered significantly on the taxation front in recent years. Speaking from the World Economic Forum in Davos, Memani outlined key priorities that should guide the Budget scheduled for February 1st.

Budget Priorities: Manufacturing Over Tax Relief

Memani emphasized that expectations of substantial tax benefits should be tempered, stating that the government has done enough from a tax standpoint. Instead, he advocated for the Budget to focus on accelerating the pace of reforms and encouraging manufacturing value addition in India.

Import Substitution Strategy

A significant opportunity lies in import substitution, according to Memani. He highlighted that India's top 50 imports account for ₹500-550 billion, presenting a substantial opportunity for domestic manufacturing.

Memani suggested that coordinated efforts between central government, state governments, and respective ministries could develop strategies involving technology partnerships, incentives, and changes in buying patterns to achieve these substitution goals.

Disinvestment Programme

The CII President advocated for a bold disinvestment approach, recommending the government target ₹75,000 to ₹1,00,000 crores in disinvestment proceeds. This capital would be crucial for preserving capital expenditure and potentially creating a sovereign wealth fund for health and education sectors, making India more competitive.

India-EU Trade Deal Opportunities

Memani expressed optimism about the proposed India-EU trade deal, expected to conclude by January 27th. He described the agreement as opening access to the entire EU market, which is actively seeking to de-risk supply chains.

Key benefits of the India-EU trade deal include:

• Access to a large European market
• Opportunities for Indian exporters to diversify
• Reduction in tariff barriers, particularly for labour-intensive industries
• Platform for enhanced government and business cooperation
• Leverage for accelerated growth

Healthcare Sector Perspectives

Suneeta Reddy, Managing Director of Apollo Hospitals, echoed the need for policy continuity in healthcare reforms. She emphasized that reforms should focus on simplification and growth enablement rather than headline tax changes. Reddy highlighted the importance of investment in preventive healthcare, noting that the burden of non-communicable diseases could cost ₹4 trillion.

Global Economic Context

Regarding President Trump's recent statements at Davos, Memani noted positive market reactions to the de-escalation of tariff threats. He suggested that market stabilization would have positive impacts on India, including potential benefits for the rupee. The focus on forging new trade relationships with like-minded countries presents opportunities for India to strengthen relationships globally.

Source: https://www.cnbctv18.com/economy/wef-davos-2026-no-big-tax-giveaways-expected-manufacturing-reforms-key-in-budget-rajiv-memani-19826408.htm

Finance Minister Nirmala Sitharaman will present the Union Budget 2026 for the financial year 2026-2027 (FY27) on February 1, with market participants anticipating measures that can drive economic growth without compromising fiscal discipline. Expectations center on announcements to boost consumption, support manufacturing, and accelerate economic growth, with markets favoring structural growth initiatives over short-term populist measures.

Fiscal Consolidation Takes Center Stage

Increased focus on fiscal consolidation represents a long-term positive for the economy and markets, as it boosts investor confidence, attracts foreign investments, improves sovereign credit ratings, and supports currency stability. India aims to narrow the fiscal deficit and bring central government debt towards 50% of gross domestic product (GDP) by FY31.

"From an investor's perspective, the key focus areas in this Budget will be fiscal discipline, continuity in capital expenditure, and policy stability. Markets will closely watch the government's commitment to its fiscal deficit roadmap, as that has a direct bearing on bond yields, currency stability, and overall sentiment," said Gaurav Bhandari, CEO of Monarch Networth Capital.

Capital Expenditure Roadmap

Government capital expenditure has served as the key driver of India's economic growth over recent years. Sustained focus on infrastructure projects will support market sentiment, with continued capex allocation towards infrastructure, defence, power, and manufacturing remaining critical for long-term growth.

Long-Term Capital Gains Tax Rationalization

Investors seek stability in taxation, particularly around capital gains and personal taxes. In Union Budget 2024, the government increased long-term capital gains (LTCG) tax to 12.50%, while raising the exemption limit to ₹1.25 lakh from ₹1.00 lakh. The market expects rationalization of LTCG tax and an increase in the exemption limit.

"If a person is selling equity based on mutual fund units after 5-7 years, ₹1.25 lakh tax exemption is a low threshold," said Mihir Tanna, Associate Director of Direct Tax at SK Patodia and Associate LLP.

Bhuvaneshwari A., Managing Director and CEO of SBICAP Securities, emphasized that the government should rationalize the LTCG tax regime for PAN-linked retail investors as a calibrated behavioral nudge. "Rewarding longer holding periods with reduced tax rates incentivises financial discipline, broadens participation, and supports market stability. With the right thresholds, such a move can be revenue-neutral while structurally aligning household savings with India's long-term growth."

Divestment Plans and Market Liquidity

Divestment initiatives will reduce government borrowing needs and increase system liquidity, boosting market sentiment. "Strong divestment (potentially ₹50,000-60,000 crore) could reduce borrowing needs, supporting equity markets by freeing up capital," said Vinit Bolinjkar, head of research at Ventura.

Infrastructure and Job Creation Push

Morgan Stanley expects the government to focus on sustained capital expenditure to support job creation, targeted social sector spending, and renewed structural reforms. Major announcements in these areas will provide long-term economic benefits.

Additional investor-focused measures may include:

• Clarity on transfer pricing and safe harbour rules
• Exemptions for IFSC units in GIFT City to attract FDI and FPI investments
• Extension of startup tax holidays to 2030
• MAT exemptions for foreign firms to spur venture capital inflows

Investment Strategy Recommendations

Experts recommend defensive strategies amid heightened market volatility. Santosh Meena, head of research at Swastika Investmart, identifies large-cap private banks and select public sector undertakings as attractive value opportunities.

"Private lenders have seen their valuations moderate significantly, offering a favourable entry point relative to their historical averages. Despite recent market pullbacks, the structural story for PSUs remains intact," Meena explained. The FMCG sector provides necessary defensive hedging with earnings visibility and stability during volatile periods.