Budget 2026-27: Building Resilience and Driving Momentum

Budget 2026-27: Strategic Recommendations for Sustaining Growth

Source

Direct Access to Coverage. The specific analysis and recommendations for the 2026-27 Budget can be found here:
A Resilient Economic Backdrop. Despite a challenging 2025 marked by **50% American tariffs** and global trade volatility, the Indian economy has maintained its momentum through continuous national reforms.
The Goal of the 2026-27 Budget. The upcoming budget is positioned not just as a financial statement but as a fillip to the mission of strengthening domestic growth levers and social sector spending.

Raising Capital Outlay. The budget should aim to enhance the share of capital outlay in defence to **30%**, up from the previous estimate of 26.4%, to accelerate modern procurement.
Boosting R&D Funding. An increase of at least **₹10,000 crore** is recommended for the Defence Research and Development Organisation (DRDO) to foster indigenous innovation.
Eastern Industrial Corridor. Establishing a new **Eastern India Defence Industrial Corridor** would build on the progress made in Uttar Pradesh and Tamil Nadu, further decentralizing defence manufacturing.

Institutional Coordination. Setting up a **Defence Export Promotion Council** is suggested to harmonize efforts between private firms, the Ministry of Defence, and international buyers.
Leveraging Private Prowess. With private enterprises already contributing **65%** to defence exports, targeted coordination is key to reaching the ₹50,000 crore export target by 2028-29.
Foreign Policy Alignment. Enhanced communication between the Ministry of External Affairs and Indian embassies is vital to opening new markets for Indian-made military hardware.

Tailings Recovery Programme. Under the National Critical Mineral Mission (NCMM), a dedicated programme is needed to treat and recover minerals from **mining waste (tailings)**.
Transition to Clean Energy. Secured supplies of critical minerals are essential to support India’s shift toward electric mobility, semiconductors, and advanced manufacturing.
Dedicated Financing. The government should consider offering specialized financial instruments to support the high-risk, long-gestation projects involved in mineral security.

RoDTEP Allocation Hike. The current allocation for the **Remission of Duties and Taxes on Exported Products (RoDTEP)** scheme should be significantly raised from ₹18,233 crore.
Countering Tariffs. A more robust remission scheme would help Indian exporters remain competitive in a world increasingly defined by high-tariff barriers and trade blocks.
Broad Policy Thrust. Beyond mere subsidies, the budget needs to provide a comprehensive policy environment that reduces the cost of doing business for Indian exporters.

Transfer Pricing Guidance. As India becomes the global hub for GCCs, the government must issue clear guidance on **Transfer Pricing (TP) models** to avoid tax friction.
Categorized Safe Harbours. Clear rules for different categories of GCCs would reduce the compliance burden and attract more high-value service centers to Indian cities.
Digital Infrastructure. Investing in the digital backbone that supports these centers will ensure India remains the preferred destination for global tech talent.

Scaling PLI Support. The budget should increase the **Production Linked Incentive (PLI)** outlay for drones from ₹120 crore to **₹1,000 crore** to achieve global scale.
Research and Development Fund. Creating a **₹1,000 crore drone R&D fund** would provide the necessary seed capital for startups to innovate in autonomous systems.
Global Competitiveness. These financial levers are intended to make Indian drone manufacturers competitive exporters in the defense and agricultural sectors.

Broadening the Issuer Base. Lowering the qualifying borrowing threshold would allow more **listed and unlisted corporates** to issue bonds, diversifying credit away from banks.
Insurance and Pension Reforms. Increasing investment caps for insurance companies beyond 25% and allowing provident funds to invest in **InvITs and REITs** would unlock long-term capital.
Rating Threshold Adjustment. Revising the ‘Approved Investment’ threshold from AA to **AA-** would enable prudent allocation of funds into high-quality but slightly lower-rated issuers.

Dual-Track Disposal. A system featuring a **fast-track** for low-value matters and a detailed track for complex cases could drastically reduce the pendency at the CIT(A) level.
Prioritizing Old Cases. Focus should be placed on appeals older than five years and those covered by existing High Court or Supreme Court rulings.
Filling Vacancies. Addressing the **40% vacancy rate** at the Commissioner of Income Tax (Appeals) level is essential for the timely delivery of tax justice.

AEO Certification Reform. Newly incorporated companies within established **AEO-accredited groups** should be made eligible for certification to facilitate faster trade.
Tariff Slab Reduction. Continuing the reduction of customs tariff slabs will help streamline duty structures and resolve persistent **inverted duty** issues.
Domestic Manufacturing Support. Calibrating import duties across the value chain will ensure that domestic manufacturers remain competitive against low-cost imports.