Budget likely to see continuity in government’s capex push: HSBC
A capital expenditure of Rs 11.21 lakh crore (or 3.1 per cent of GDP) has been allocated in 2025-26, with an annual increase.
Spending priorities will likely continue to focus on sustaining growth through public investment, although the government has limited space for major policy changes or major announcements, the report said.
The report underlined that infrastructure expenditures are the mainstay of the economic strategy despite ongoing fiscal consolidation efforts, and said, “On the expenditure front, we can continue to expect the Centre’s continued commitment to Capital Expenditures.”
HSBC Investment Fund is of the view that the Budget is unlikely to introduce major changes to tax policy, given the limited policy tools available.
“Given the limited policy tools, we are unlikely to see major policy changes or major policy measures in this Budget,” he said.
Transfers to states and the use of long-term, interest-free loans from the Center to the US are also expected to remain on the agenda. From a spending perspective, the report identified defence, agriculture and rural development, along with increased interest in technology and artificial intelligence, as sectors that could see targeted allocations.
The report also pointed out the possibility of continuing support for manufacturing and exports.
“Fiscal discipline and policy continuity following last year’s Budget could in itself be supportive of growth. However, given the persistently high tariffs, we think the government could take steps in its recently established Export Promotion Mission to support export sectors affected by tariffs, possibly through subsidies, incentives or targeted support.” he said.
The report suggested that policy continuity in an environment of gradual fiscal consolidation will likely determine the budget’s approach and that capital spending will be at the center of the government’s growth strategy next year.
As in the Convention, the Union Budget 2026-27 will be presented to the Parliament on 1 February 2026.
