Anticipations Rise for Union Budget 2026 as Key Stakeholders Seek Clarity on GST and Economic Measures

As the countdown to February 1, 2026, begins, Finance Minister Nirmala Sitharaman is preparing to present her ninth consecutive Union Budget. Against a backdrop of a projected 7–7.5% GDP growth, the 2026-27 Budget is being viewed as a "policy stability" milestone. However, beneath the surface of robust macro-economic numbers, key stakeholders from India’s manufacturing, healthcare, and MSME sectors are calling for decisive moves to resolve persistent GST friction and unlock private capital.

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The "GST 2.0" Agenda: Moving Beyond Rate Tweaks

While the 56th GST Council meeting in late 2025 provided some relief by rationalizing slabs for essential goods, industry bodies like FICCI and ASSOCHAM are pushing for deeper structural reforms in the 2026 Budget.

• Working Capital Relief: A primary demand is the unlocking of trapped Input Tax Credit (ITC). Currently, an "Inverted Duty Structure"—where taxes on raw materials are higher than on finished goods—is stifling sectors like textiles, footwear, and EV manufacturing.
• Insurance Rationalization: Following the removal of the 18% GST on life and health insurance premiums in 2025, stakeholders now seek a further reduction for senior citizens and the introduction of a composite licensing framework to boost insurance penetration.
• Compliance Digitalization: To aid the 8.2 crore MSMEs, experts anticipate the launch of a "Green Channel" for credit, linked directly to GST e-invoice data, which would allow for faster, cash-flow-based lending.

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Direct Tax: The "New Regime" Consolidation

With the Income-tax Act, 2025 set to take effect on April 1, 2026, the upcoming budget will likely mark the final transition toward a simplified tax code.

• Standardization of TDS: One of the top "pain points" for India Inc. is the complexity of withholding taxes. The Budget is expected to collapse the current dozens of TDS rates into 2 or 3 standardized categories to reduce administrative friction.
• Consumption Push: While a "bumper" tax cut is unlikely given the 4.4% fiscal deficit target, analysts expect slight adjustments to the tax slabs in the New Tax Regime to put more disposable income into the hands of the middle class, specifically targeting the ₹15 lakh to ₹20 lakh income bracket.
• Capital Gains Clarity: Following the 2024-25 overhaul, Web3 and startup ventures are seeking a "standardization" of capital gains, allowing for loss offsetting to encourage risk-taking in the tech sector.

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Key Thematic Priorities for FY27

The 2026 Budget is expected to balance fiscal prudence with targeted incentives across four critical pillars:

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The Healthcare Imperative: Fighting Medical Inflation

A significant pre-Budget trend is the focus on healthcare reform. With medical inflation projected to hover between 11.5% and 14% in 2026, out-of-pocket expenses remain a major concern.

• Spending Boost: Stakeholders are urging the government to raise public healthcare spending from the current ~1.9% of GDP toward the long-standing target of 2.5%.
• R&D Incentives: To make India a global hub for medical devices, manufacturers are seeking the restoration of weighted tax deductions for R&D and faster patent approval timelines.

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Expert Insight: The "Saturday Factor" and Policy Stability

"Union Budget 2026 must signal a shift from 'Reform Momentum' to 'Policy Stability.' A predictable, rules-based tax regime is now more important than fresh incentives for attracting global capital." — Sanjeev Sanyal, Member of the Economic Advisory Council to the PM (EAC-PM).

Looking Ahead

As the Finance Ministry enters the final week of "Halwa Ceremony" seclusion, the market sentiment remains cautiously optimistic. If Minister Sitharaman can deliver on GST simplification and TDS rationalization while maintaining the 4.4% fiscal deficit glide path, 2026 could be the year India’s private investment cycle finally hits full throttle.