EY's Union Budget 2026 Recommendations: Strategic Capex Focus and Fiscal Discipline
As India prepares for the Union Budget 2026, global professional services firm EY has released a comprehensive analysis outlining key priorities for the government. The report emphasizes a dual approach of boosting capital expenditure in critical sectors while maintaining fiscal prudence, setting the stage for what could be a transformative budget for the nation's economy.
Targeted Capital Expenditure in Defence and Advanced Technology
EY's analysis strongly advocates for a significant hike in capital expenditure, particularly in the defence and advanced technology sectors. This strategic move is seen as essential for enhancing national security and fostering innovation-driven growth. The recommendation aligns with India's broader goals of self-reliance and technological sovereignty, positioning these sectors as pivotal for long-term economic resilience.
The defence sector is highlighted for its potential to drive manufacturing and create high-skilled jobs, while advanced technology investments could accelerate digital transformation and global competitiveness. EY suggests that such targeted capex could yield multiplier effects across the economy, stimulating private investment and boosting overall productivity.
Fiscal Deficit Target of 4% Amid Revenue Challenges
Despite acknowledging a revenue shortfall in FY26 compared to initial budget estimates, EY projects that the government can still achieve a fiscal deficit target of 4.4% of GDP. The firm further recommends aiming for a more ambitious 4% deficit, underscoring the importance of fiscal discipline in sustaining economic stability.
This target reflects a balanced approach to managing public finances, where increased spending in priority areas is offset by efficient revenue mobilization and expenditure rationalization. EY's analysis points to potential measures such as broadening the tax base and optimizing subsidies to bridge the revenue gap without compromising on essential investments.
Navigating Revenue Shortfalls and Economic Priorities
The report candidly addresses the challenges posed by revenue shortfalls, which could strain budget allocations if not managed effectively. However, EY remains optimistic about the government's ability to navigate these hurdles through prudent fiscal management and strategic policy interventions.
- Enhanced revenue collection through digital initiatives and compliance improvements.
- Rationalization of non-essential expenditures to free up resources for critical sectors.
- Leveraging public-private partnerships to supplement government spending in infrastructure and technology.
By focusing on these areas, EY believes that the Union Budget 2026 can strike a delicate balance between stimulating growth and maintaining fiscal health, ultimately supporting India's trajectory toward becoming a $5 trillion economy.
As stakeholders await the official budget announcement, EY's insights provide a valuable framework for understanding the potential priorities and trade-offs that could shape India's economic policy in the coming year.
