New Delhi, Jan 28 (NationPress) The Union Budget 2026 is expected to significantly focus on essential sectors such as defence, critical minerals, power, electronics, and infrastructure, along with promoting growth in affordable housing, according to a report released on Wednesday. It highlighted that policymakers are striving to balance growth objectives with fiscal discipline amid global uncertainties.

Despite limited expectations for large-scale announcements, even targeted measures could potentially enhance market sentiment, as noted by Motilal Oswal Financial Services Ltd in their ‘India Strategy’ report.

The upcoming FY27 Union Budget must adeptly balance maintaining growth momentum while ensuring fiscal consolidation, especially in light of immediate challenges stemming from unprecedented geopolitical changes.

“Our discussions revealed that investors do not anticipate significant measures while the Finance Minister navigates various challenges—thus creating a lower base for potential positive surprises,” the report noted.

Over the years, the budget's influence has become relatively limited due to numerous extra-budgetary actions; thus, equity markets will likely scrutinize it for specific measures aimed at fostering growth in select sectors and alleviating investor concerns, it added.

The government has consistently followed a path of fiscal consolidation, with the fiscal deficit declining from the Covid-induced peak of 9.2 percent to an estimated 4.4 percent for FY26E.

“We anticipate that the government will largely uphold its fiscal discipline and do not foresee major deviations from this trajectory. However, since FY27 will signify a shift to debt/GDP as a targeted fiscal marker, and overall consumption has yet to fully recover with sentiment improving unevenly, a scenario of pragmatic, minor fiscal relaxation cannot be entirely dismissed,” the report indicated.

The equity market is likely to support such a move, particularly if it is strategically directed towards enhancing productive capital expenditures or stimulating consumption, rather than low-multiplier transfer payments or administrative costs.

Given that the FY26 Union Budget leaned more towards stimulating middle-class consumption through personal income tax exemptions amounting to Rs 1 lakh crore, and its effects are still pending, “we believe that the FY27 Union Budget’s strategy for stimulating consumption will be selective.”

“As a result, the budget is expected to prioritize capital expenditure, especially in sectors considered strategically vital due to current geopolitical pressures,” it concluded.