Akshit Baru & Anshul Sharma
The Union Budget 2026-27 represents what economists might call a “Goldilocks moment”-a delicate balance where the economy is neither overheating with populist stimulus nor cooling down from austerity but is positioned just right for sustainable expansion. If someone is trained to look past the headline numbers to the underlying structural shifts, this budget stands out for its refusal to bow to the typical political business cycle. In a year where electoral arithmetic in states like Tamil Nadu and West Bengal could have easily dictated a loosening of the purse strings, the government has chosen conviction over convenience. It signals a quiet confidence that building durable institutions and strengthening productive capacity-rather than short-term applause.
This commitment to long-term is most visible in the government’s adherence to fiscal discipline. Staying true to the glide path announced in 2021-22 to bring the fiscal deficit below 4.5% of GDP, the finance minister has projected a further decline to 4.3% for FY27. It is a vital signal of credibility to global markets and domestic investors. Coupled with the commitment to reduce central government debt to 50% of GDP by 2031, this discipline highlights a “People Over Populism” approach. It acknowledges an intergenerational responsibility, ensuring that today’s consumption does not become tomorrow’s debt burden.
However, this fiscal prudence has not come at the cost of growth. The budget continues the heavy lifting on the supply side with a massive public capex allocation of ?12.21 lakh crore. From a macroeconomic perspective, this is a strategic deployment intended to trigger a high fiscal multiplier, crowding in private investment rather than displacing it. The announcement of seven new high-speed rail corridors, including Mumbai-Pune and Delhi-Varanasi, reinforces a “Velocity as Strategy” approach. These are not just transport projects; they are economic corridors designed to reduce logistics costs and integrate regional markets, effectively shrinking the economic distance between hubs.
The budget also demonstrates a sophisticated understanding of modern production functions, laying out the groundwork for a future-ready economy. It harmonizes high-tech ambitions through the push for the semiconductor industry-with the soft power of the “Orange Economy” (creative industries). This recognition that creative output is as much a pillar of a modern nation as manufacturing is refreshing. Complementing this are significant customs reforms, such as removing the value cap on courier exports, which directly eases the friction for Indian businesses integrating into global trade.
Perhaps the most interesting structural pivot is visible in the rural economy. Moving beyond traditional agrarian subsidies, the government is linking rural development with strategic autonomy through rare earth mining projects in Odisha, Andhra Pradesh, Kerala, and Tamil Nadu. By tapping these resources, the budget aims to reduce import dependence for critical minerals needed in defense and clean energy while simultaneously generating high-skilled employment in coastal regions. This effectively integrates these states into the high-value industrial mainstream.
The budget addresses the financial plumbing of the economy. The proposal to set up a High-Level Committee on Banking comes, counter-intuitively, at a time when the sector is in its best health in years. With Net Non-Performing Assets (NNPAs) at multi-decade lows of 0.5% and Gross NPAs at their lowest in 12 years, the government is fixing the roof while the sun is shining. This proactive institutionalization of reforms ensures the system is robust enough to support the next phase of credit expansion. This health in the banking sector is directly leveraged to support the “missing middle”-the MSMEs. By expanding the TReDS platform to treat receivables as asset-backed securities and raising the safe harbour threshold for IT services from ?300 crore to ?2,000 crore, the budget addresses the real friction points of liquidity and compliance, rather than just offering temporary sops.
In conclusion, Budget 2026-27 eschews the “revdi culture” of freebies for the harder, more rewarding path of structural reform. It respects the intelligence of the voter and the potential of the economy, offering a roadmap that is driven by economic logic rather than political expediency.
(The authors Akshit Baru is Advocate by Profession and Anshul Sharma is Student of Economics at Delhi School of Economics)
