Union Budget 2026: India to Balance Fiscal Consolidation with Growth, Says EY

• EY's Economy Watch report for January 2026 highlights India's challenge: reducing fiscal deficit without harming investment-led growth.
• Policymakers aim to cut the fiscal deficit from 4.4% of GDP in FY26 to 4.0% in FY27, but slow nominal GDP growth and weak tax collections limit aggressive tightening.
• Government capital expenditure is a key growth driver; EY warns against sharp cuts that could weaken the economy amid fragile external demand.
• Fiscal consolidation will likely target subsidies, administrative expenses, and non-essential spending, while protecting infrastructure investment.
• The FY27 Budget is expected to prioritize the "quality of fiscal consolidation," focusing on sustained public investment and gradual reduction of consumption-oriented spending.

Why It Matters: India's Union Budget 2026 will focus on quality fiscal consolidation, balancing deficit reduction with growth protection.