India stands at a critical juncture. While sustaining its position as the world’s fastest-growing major economy—having crossed the USD 4 trillion GDP mark with 6.6% to 8% quarterly growth—this momentum is threatened by external trade risks and persistent domestic employment challenges. The upcoming Union Budget 2026, to be presented by Finance Minister Nirmala Sitharaman, must be a blueprint for long-term resilience and the nation’s ambitious goal of achieving developed-nation status by 2047.
Thank you for reading this post, don't forget to subscribe!The Paradox of Strong Growth
India’s recent success has been fueled by robust fundamentals, primarily strong domestic demand. This confidence is evident in the private consumption surge (around 7% growth), boosted by reforms like the new Income Tax Act, 2025, which exempted income up to ₹12 lakh for many. Record-breaking retail activity and the RBI’s upward revision of the FY26 GDP forecast to 7.3% underscore the economy’s structural strength.
However, this macroeconomic stability masks three critical vulnerabilities:
- Trade and Tariff Shocks: External risks have intensified following the US decision to double tariffs on key Indian exports, including textiles and agricultural goods, with duties rising as high as 50%. This uncertainty places significant pressure on India’s trade balance.
- Employment Crisis: The domestic labor market remains a key challenge, with the unemployment rate averaging 7-8% in FY 2025. Despite rapid digitization and AI adoption, job creation has not kept pace, resulting in particularly high youth unemployment.
- Currency and Import Inflation: The rupee’s depreciation to a historic low of ₹90 per US dollar in December FY 2025 has sharply increased the cost of essential imports, notably energy and raw materials, fueling inflation and hurting small businesses.
The Imperative for Budget 2026
To sustain high growth and manage these vulnerabilities, the Budget must prioritize targeted structural reforms:
- Modernising MSMEs: The next wave of productivity gains must come from India’s Micro, Small, and Medium Enterprises, especially in Tier-2 and Tier-3 cities. The Budget must offer incentives for digital onboarding, adoption of AI-enabled productivity tools, improved logistics infrastructure, and simplified cluster-based financing to unlock their potential.
- Stimulating Consumption: While consumption is strong, carefully designed tax adjustments are necessary to ease household burdens and stimulate urban discretionary spending, keeping the middle class central to the domestic growth story.
- Addressing Energy Security: Given India’s 88% dependence on energy imports, the Budget’s external stability hinges on using realistic crude-oil assumptions to manage the impact of global price volatility on inflation and the currency.
Conclusion:
Reflecting on China’s long-term, strategic blueprints like the Five-Year Plans, India must utilize Budget 2026 as more than an annual exercise. It must be a decisive, strategic step to reinforce self-reliance, energize the private sector, and address structural weak spots. Effective execution of these measures will be key to laying the groundwork for a high-growth decade and making the vision of a Developed India by 2047 a reality.
These are my personal views and do not reflect the stand of this publication..!
