The PHD Chamber of Commerce and Industry (PHDCCI) has unveiled an ambitious proposal for Budget 2026-27, calling for a substantial increase in government capital expenditure to counter global growth uncertainty and stimulate economic momentum. The recommendation comes at a time when private investment has moved off its peak, necessitating state intervention as the primary growth catalyst.

Proposed Capital Expenditure Framework

At the core of PHDCCI's proposal lies a significant scaling up of public capital spending, targeting an additional ₹5 lakh crore over the next five years. This represents approximately 2.6% of GDP 2024-25. The investment strategy focuses on productive assets across multiple sectors including infrastructure, logistics, green energy, housing, manufacturing, digital systems, and human capital development.

Economic Impact and Growth Multipliers

PHDCCI's analysis indicates that public investment delivers some of the highest fiscal multipliers in the Indian context. The organization emphasizes that empirical evidence shows capital expenditure multipliers peak within the first 2-3 years, particularly when infrastructure gaps exist. The strategy aims to raise near-term demand while simultaneously expanding the economy's productive capacity.

According to PHDCCI estimates, the incremental capital push could lift GDP by roughly 0.7-1.1 percentage points over the medium term once lagged effects are accounted for. The immediate beneficiaries include construction activity, materials sector, transport services, with long-term benefits flowing to businesses through reduced operational costs from improved infrastructure.

Employment Generation Potential

The proposal places significant emphasis on job creation, addressing current concerns about job quality and participation rates. Infrastructure and housing sectors, being among the most labour-intensive, are expected to absorb large numbers of low- and semi-skilled workers.

Sustainability Integration

A distinctive aspect of the 2026-27 proposal involves integrating growth policy with climate and sustainability objectives. The framework positions Green, ESG, and Sustainable Development Bonds as financing instruments for renewable energy projects, green hydrogen initiatives, and energy transition programs aligned with India's target of 500 GW of non-fossil capacity by 2030.

Key sustainability programs highlighted include the National Green Hydrogen Mission and solar rooftop expansion, demonstrating an attempt to combine fiscal expansion with global decarbonization goals. PHDCCI notes that the strategy's effectiveness will depend on timely project rollout and coordination with states, while acknowledging risks from global financial conditions and commodity price volatility.

Strategic Rationale

PHDCCI positions this proposal as prioritizing capital formation over populism, reinforcing public investment as the bridge between current economic uncertainties and future growth potential. The organization argues that improved logistics, reliable power, digital connectivity, and urban infrastructure will reduce business risks and enhance returns, ultimately attracting higher corporate investment and reinforcing India's attractiveness as a foreign direct investment destination.

Industry leaders are advocating for the return of targeted tax incentives and comprehensive compliance reforms as Budget 2026 approaches, according to KPMG in India's Pre-Budget Survey 2026. The survey captures critical industry sentiment ahead of both the budget announcement and the rollout of the New Income Tax Act, scheduled to take effect from April 1, 2026.

Survey Methodology and Scope

The comprehensive survey, conducted by KPMG in India during January 2026, gathered insights from more than 100 senior executives and C-suite leaders representing diverse sectors including financial services, technology, pharmaceuticals, healthcare, and consumer markets. This broad industry representation provides a comprehensive view of corporate expectations for the upcoming budget.

Tax Incentive Expectations

Industry sentiment strongly favors the revival of manufacturing-linked tax benefits, with specific preferences for targeted approaches:

The data indicates a clear industry preference for focused, sector-specific incentives rather than universal tax benefits, reflecting a more strategic approach to fiscal policy expectations.

Compliance and Administrative Reforms

While respondents acknowledged the New Income Tax Act as a positive step toward simplification, several areas requiring further rationalization emerged from the survey:

Top Three Priority Areas for Streamlining:

• TDS and TCS compliance procedures
• Assessment and litigation processes
• Capital gains tax regime

These findings suggest that despite legislative progress, practical implementation challenges remain significant concerns for industry stakeholders.

International Financial Services and Personal Taxation

The survey reveals substantial demand for clarity in International Financial Services Centre (IFSC) operations, with 51% of respondents calling for safe harbour provisions to ensure long-term certainty for IFSC-related arrangements.

Personal taxation emerged as a critical focus area, with 73% of respondents supporting significant increases in standard deduction for salaried individuals, indicating widespread concern about individual tax burden levels.

Dispute Resolution and GST Challenges

Current dispute resolution mechanisms face significant criticism from industry participants:

The GST Invoice Management System challenges particularly stand out, with 82% of respondents supporting comprehensive framework review and enhanced reconciliation capabilities to address mismatches and credit note rejections that increase GST liabilities.

Industry Leadership Perspective

Sunil Badala, Partner and National Head of Tax at KPMG in India, emphasized that while recent changes in income-tax slabs and GST rates have supported consumption through improved disposable incomes, stakeholders continue expecting further reforms. He highlighted that strengthening dispute resolution mechanisms, revising safe harbour rules, and improving the GST invoice system remain key expectations from Budget 2026, particularly as the new Income Tax Act implementation approaches.