India's Economic Resilience Shines Amid Global Uncertainty with 7.4% FY26 Growth Projection
In a world grappling with geopolitical tensions, trade fragmentation, and financial vulnerabilities, India has charted a commendable path of progress for the fiscal year 2026. The Economic Survey 2025–26 reaffirms India's status as the fastest-growing major economy, projecting real GDP growth at an impressive 7.4% in FY26, with estimates of 6.8–7.2% for FY27. This robust performance is underpinned by over 350 structural reforms, including GST simplification, new Labour Codes, and the rationalisation of mandatory Quality Control Orders.
Budget 2026: A Youth-Driven, Reform-Centric Roadmap for Viksit Bharat
Against this backdrop, the Union Budget 2026 presents a growth-focused, youth-driven, and reform-centric blueprint that reinforces the government's long-term vision of Viksit Bharat by 2047. The budget sets out a comprehensive agenda aimed at strengthening high-value manufacturing, upgrading services, expanding infrastructure, and advancing people-centric development.
Key industrial priorities include a strategic push for sectors such as:
- Semiconductors and electronic components
- Biopharma and chemicals
- Rare-earth magnets and container manufacturing
- Sports goods production
Additionally, the budget outlines plans to revive 200 industrial clusters to rebuild industrial depth and enhance manufacturing capabilities.
MSME Support and Services Economy Enhancement
Recognising Micro, Small, and Medium Enterprises (MSMEs) as vital growth catalysts, Budget 2026 introduces a three-part support architecture:
- Dedicated equity funds for capital infusion
- Faster TReDS-enabled working capital flows
- Professional compliance assistance to reduce regulatory burdens
The services economy receives a significant boost through initiatives such as establishing tourism hubs, building allied health capacity, and promoting a creative-economy pipeline via AVGC creator labs. Infrastructure development focuses on new freight corridors, waterways, coastal logistics, and economic regions in Tier-2 and Tier-3 cities.
Direct Tax Reforms: Clarifying Ambiguities and Simplifying Compliance
On the direct tax front, Budget 2026 proposes several retrospective amendments to settle long-standing controversies. First, it addresses the JAO–FAO controversy in reassessment proceedings by clarifying that actions initiated by Jurisdictional Assessing Officers (JAOs) are valid, eliminating jurisdictional ambiguity and ensuring procedural uniformity.
Second, the budget resolves uncertainty stemming from the Supreme Court's split verdict in the Shelf Drilling case. It clarifies that timelines for passing draft assessment orders will be governed by section 153 of the Income-tax Act, while final assessment orders will follow section 144C.
Other significant tax measures include:
- Simplified tax compliance procedures
- Lower TCS rates to ease liquidity
- Staggered timelines for filing tax returns
- Rationalisation of penalties and prosecutions
These changes are expected to foster a trust-based, business-friendly tax environment, encouraging investment and economic activity.
International Tax Framework and Indirect Tax Simplification
Budget 2026 streamlines the international tax framework for the IT/ITeS sector by clubbing services under a single category with a 15.5% safe-harbour margin. The safe-harbour threshold is raised to ₹2,000 crore, and unilateral Advance Pricing Agreements (APAs) are fast-tracked with a targeted two-year timeline.
Notably, the budget proposes a tax holiday until 2047 for foreign cloud service providers serving customers through India-based data centres, aiming to boost digital infrastructure. On share buybacks, a marked departure from last year, shareholder income will be taxed as capital gains rather than dividends, with an additional levy on promoters.
From an indirect tax perspective, the government continues its focus on rate rationalisation, compliance simplification, and ease of doing business. GST-related changes align with announcements from the 56th GST Council meeting, including shifting the taxability of intermediaries from the service provider's location to the service recipient's location. This grants export benefits to Indian intermediaries providing services to foreign recipients.
Unmet Expectations and Future Challenges
Despite these progressive measures, Budget 2026 fell short in certain areas. Taxpayers had hoped for an upward revision of personal income-tax slabs, but no changes were announced—a decision understandable given last year's significant rate adjustments. India Inc. sought renewed R&D incentives to enhance global competitiveness, but these did not materialise.
Similarly, the industry awaited a clear roadmap to address the mounting backlog of cases at the CIT(A) level, but none was announced. Long-requested rationalisation of the TDS regime also found no place in the Finance Minister's proposals, leaving some stakeholders disappointed.
India's Pivotal Moment: Converting Resilience into Opportunity
As India enters FY26, it stands at a pivotal moment, demonstrating resilience amid global uncertainty while pursuing ambitious long-term aspirations. The Economic Survey's scenarios suggest that while the world may oscillate between fragile stability, heightened volatility, and severe shocks, India's fiscal strength and reform-driven agenda offer meaningful insulation.
By simplifying taxes, easing compliance, and sustaining growth momentum, Budget 2026 accelerates progress towards Viksit Bharat. This positions India to convert resilience into opportunity, ensuring the nation remains firmly on course despite global turbulence, with a clear vision for inclusive and sustainable development.
