Deloitte: Budget 2026 Must Back MSMEs, Exports Amid Global Trade Risks
Overview
Deloitte forecasts the Union Budget 2026 will champion MSME support, infrastructure, and export diversification while upholding fiscal discipline. Despite strong FY25 growth around 8% and projected 7.6-7.8% for FY26, economists warn FY27 could soften due to global trade volatility and geopolitical tensions, emphasizing the need for investor reassurance.
Deloitte India economists anticipate the upcoming Union Budget 2026 will prioritize robust support for Micro, Small, and Medium Enterprises (MSMEs), alongside investments in infrastructure and initiatives to diversify export markets. A key expectation is the government's continued commitment to fiscal discipline, aimed at reassuring global investors amid rising geopolitical and trade uncertainties.
Budget 2026 Focus Areas
Rumki Majumdar, Economist at Deloitte India, noted India's "surprising" growth momentum in FY25, achieving around 8% expansion. This robust performance is attributed to effective policy reforms and strong domestic demand. Looking ahead, FY26 growth is projected between 7.6% and 7.8%, supported by healthy Goods and Services Tax (GST) collections and sustained consumption patterns.
Growth Projections Firm, But Cautious Outlook Ahead
Despite the optimistic domestic outlook, Majumdar cautioned that growth in FY27 could moderate. This potential slowdown is linked to increasing global trade and geopolitical uncertainties, including the lack of clarity on trade deals like the one with the United States. Tax exemptions are expected to continue cushioning domestic demand against external pressures.
Tax Collections Expected to Rebound
MS Mani, Partner at Deloitte India, believes concerns about a short-term dip in tax collections are overstated. He asserts that tax revenues, both direct and indirect, are intrinsically tied to economic activity. Strong performance in key sectors such as real estate, automobiles, and infrastructure is anticipated to drive significant revenue growth, leading to annual tax targets being met. Mani suggested this could bring the fiscal deficit closer to 4.3%.
Geopolitical Risks Loom Large
Geopolitical developments represent a significant concern for policymakers preparing the Budget. Substantial FPI outflows of approximately $18.5 billion in FY25 (April-October) highlight investor caution. Unresolved trade negotiations with the US and existing tariffs on Indian exports weigh on sentiment. While free trade agreements are helping diversify markets, a slowdown in the US economy could still impact India's current account, currency, and foreign exchange reserves.
