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This India Today special report features a pre-budget roundtable hosted by Rajdeep Sardesai, focusing on the Union Budget 2026 and the challenges facing Finance Minister Nirmala Sitharaman. Top economists, including Neelkanth Mishra, Sajid Chinoy, and Naina Lal Kidwai, analyze India's strategy amidst global geopolitical shifts and the 'fog of uncertainty.' Key discussion points include the 4.4% fiscal deficit target, the impact of 'Operation Sindoor' on defense spending, and the necessity of structural reforms to boost manufacturing. Experts deliberate on easing Press Note 3 to attract Chinese FDI, the role of the 16th Finance Commission, and tax clarity for Global Capability Centres. The panel provides a GDP growth forecast for FY27 between 6.5% and 7%, emphasizing the urgency of micro-reforms in urban infrastructure and agriculture. The report highlights the tension between fiscal consolidation and the need for private investment to jumpstart the economy, exploring trade relations with ASEAN and the importance of export-led growth in a fragmented global order.
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00:00Hello and welcome to the Pre-Budget Special Roundtable.
00:04Never before have geopolitical issues cast such a fog of uncertainty over a budget-making exercise.
00:12In a climate of intense global headwinds and uncertainty,
00:17Finance Minister Nirmala Sitaraman's ninth consecutive budget this Sunday
00:21will be expected to sustain reforms and achieve macroeconomic stability
00:27and ensure that growth doesn't taper off.
00:31What then are the challenges before the Finance Minister and the Modi government
00:34and what lies ahead in 2026 for the Indian economy?
00:39Joining us on the Pre-Budget Roundtable is a stellar panel of economists and industry voices.
00:46I'm joined by Neelkand Mishra, Chief Economist, Axis Bank,
00:49Soumya Khan Ghosh, Chief Economic Advisor, State Bank of India,
00:53Pranjal Bhandari, Chief India Economist, ASEAN Economist, HSBC,
00:58Neelesh Shah, Managing Director at Kotak Mahindra Asset Management,
01:02Nenalal Kidwai, former President Fikhi,
01:04Sajid Chinoy, Chief MD and India Economist at JP Morgan.
01:08Good to have all of you.
01:09Some of you are part also of the Prime Minister's Economic Advisory Council.
01:14I've got to go question by question as we do on the roundtable
01:17and we'll get all of you to respond to those questions.
01:20Let's start with the first big question.
01:22What is the principal challenge facing Finance Minister Nirmala Sitaraman in this budget year?
01:31Neelkand Mishra, why don't you kick that off?
01:33I'll get each of you to get 90 seconds to tell us
01:36if you were Finance Minister,
01:38what would you see as your principal challenge two days out from the big budget?
01:42So, there is significant slack in the economy.
01:48So, the very fact that the core inflation indicators are showing such low measures
01:56and we have the economy significantly below the pre-pandemic path suggests that there is space for the government to stimulate.
02:07But, at the same time, I think it's important to make a choice between fiscal and monetary.
02:15The biggest challenge, I think, for the government right now is that it has chosen the path of fiscal conservatism,
02:24which I think is the right one.
02:25It is likely to stick to the debt-to-GDP path that it has guided to, 50% at the central level, the left 531.
02:35But this is not reflecting in lower yields.
02:39So, if the government borrows less, that should mean that the cost of borrowing in the economy should come down.
02:46There are clearly transmission issues.
02:48Some of them lie at the door of the RBI.
02:52But I think there are many challenges in front of the government as well.
02:57I think the government…
02:59Yeah, go ahead.
03:00No, before I go to my next year, just to, you know, do you believe that maintaining the FY26 fiscal deficit at 4.4% amidst mounting infrastructure,
03:10welfare, defense expenditure post-operation sindoor, do you believe that that will be met?
03:16Are you confident of that?
03:17Or is that a big challenge?
03:20Look, there has been some tax slippage.
03:23I would say that there is potentially some slippage of 60,000, 70,000 crores, which is, give or take, about 0.1, 0.2% of GDP, 0.2% of GDP.
03:36But that, given the significant cash balance which is accumulating, I don't think should be difficult to finance.
03:43But I think the challenge is not this year.
03:46The challenge is what happens next year.
03:47And more importantly, what happens in FY28 when the pay commission comes to the government and how they manage to retain the path to 50% debt to GDP.
03:59But I think the immediate challenge is much bigger, which is that despite this fiscal consolidation, despite this remarkable fiscal discipline,
04:09the cost of money in India, the cost of capital is not falling as sharply as it should.
04:14Okay, I'll get you to expand on that later.
04:18But Sajid Chinoy, what do you believe is the principal challenge facing finance minister, Sitaraman?
04:24Good evening, Rajdeep.
04:25I think the principal challenge is the global backdrop against which this budget is being held.
04:30I think these are truly extraordinary times.
04:33You know, there's a certain global order that we've come to expect over the last 80 years, which is unraveling and unraveling rapidly.
04:39This has two implications.
04:40In the near term, this is leading to a lot of financial instability globally.
04:44You've seen gold prices at record highs.
04:47People don't know if there's a risk-free asset that you can consider risk-free in the world anymore.
04:51Concerns about dollar debasement.
04:53Now, in that environment, the typical reaction for emerging markets like India is to hunker down.
04:59When there's global instability, you know, be conservative.
05:03Reduce your fiscal deficit.
05:05Create buffers.
05:05But what's unique about this global environment is also one where, you know, the law of the jungle has begun to prevail and economic heft really matters for global leverage.
05:16And that would argue to go in the other direction, to be adventurous, to push on the reform pedal.
05:22So I think the challenge that is unique this time is you've got one set of forces arguing for conservatism.
05:27There's another set of forces arguing for being adventurous.
05:31And I think the way to, you know, bring this together is I think the fiscal deficit will be conservative on the map.
05:38I think deficits will go down to reassure investors that India's macro fundamentals remain very stable.
05:45But I think this year's budget is to be not the numbers, but what happens in the budget speech.
05:51And we use the budget speech to inject much needed reforms or a continuation of the reforms in the last six months.
05:58And you and you exhibit your adventurism over there.
06:01So I think that's the balance.
06:03How do you simultaneously be conservative on the fiscal map, but be adventurous on the reform front?
06:08So you are telling people that, you know, we're going to push hard on the growth ladder, but we're not going to do it at the risk of macroeconomic instability.
06:17It's that balance.
06:18I think that is going to be crucial in this budget.
06:20We'll come to specific reforms also later on the roundtable.
06:24But Pranjal Bhandari, your view, what do you see as the principal challenge facing finance minister, Nirmala Sitaraman?
06:31Yes, thank you very much, Rajdeep.
06:33I think there are two challenges.
06:35One is uncertain growth and the other is a weakening currency.
06:39Now, an uncertain growth.
06:40Last 12 months, the growth numbers have been very good, but we can't take this for granted.
06:45Because a lot of one time good things happened.
06:48For example, after a long time, there were good rains.
06:50Suddenly, oil prices fell, which is good for the economy in terms of growth.
06:54Then we had inflation falling.
06:56So the central bank would cut rates.
06:58We had all of those tax cuts, GST and personal income tax.
07:01We had enough to get us good growth numbers.
07:04But the efficacy of all of this could start to decline as we get into 2026 or, you know, FI27.
07:11And what will drive growth then in a global environment that remains uncertain?
07:16I think that's sort of like the number one challenge for the finance minister at this point of time.
07:20You know, we can get into what I think is the right thing to do right now.
07:23But mostly I would agree with the previous speakers that it's a combination of restraint.
07:28Don't become too adventurous on the fiscal part or on the monetary policy part and stick on with a lot of the reforms.
07:35I just want to make one point here that this is not a T20 moment.
07:39It's like playing a test match.
07:40You know, we don't have to hit a six in every ball.
07:43The scoreboard doesn't really have to look exciting at the end of every over because I think that's how we really win this one.
07:49So, we have to really get into these important reforms which get us good, meaningful, medium-term growth.
07:55And, you know, we can speak a little bit later about both external and domestic reforms.
07:59In fact, that's my next question.
08:01What are the key reforms going to be?
08:03I'll come to that.
08:03But I like the T20 analogy with test matches because, remember, we are not a very good test match team at the moment.
08:10We are a brilliant T20 team.
08:12So, in a strange way, with the T20 World Cup coming up in a week's time,
08:15you're telling us don't, the finance minister should not be looking to hit the ball out of the park on day one.
08:21You're asking this to be a long-term, a budget for the next two, three years.
08:24Am I broadly correct?
08:26Or set the direction for the next two, three years?
08:29Yes, exactly. Yes.
08:31Okay.
08:32So, my son, your first reactions.
08:35What do you believe is the principal challenge facing finance minister Sitaraman?
08:39Yeah.
08:40Thank you, Razdi, for having me on the show.
08:42I think the budget, the primary challenge the finance minister is facing is the extraordinary global situation.
08:49I think we are living in a fragmented world.
08:53And you don't know what is going to happen today or even tomorrow.
08:56Every day, the policy is changing.
08:58And that is actually creating a lot of pressure on the external environment.
09:02So, that is the first thing.
09:04The second thing is that in that context, it is also creating a lot of pressure on macro variables like the rupee, the interest rate, and other factors.
09:14The third thing is that in this era of significant policy uncertainty where you don't know what is going to happen tomorrow,
09:21you don't know whether the trade deal with the US is going to materialize,
09:24it is better that we stick to the basic principles of economics in the budget.
09:30We stick to the fiscal path because we have actually has been one of the few countries which have charted a very conservative fiscal deficit target after the pandemic
09:39and which has paid dividends to us in terms of a low inflation.
09:42And the second thing we need to do is basically do some of the reforms, continue on the reforms path.
09:48We have done a lot of reforms in the last year in terms of the macro reforms.
09:51Right now, maybe it may be the time to do some of the micro reforms which could actually give dividends.
09:57So, in my sense, I think there is nothing to do any extraordinary, but just stick on the basics and on the path of consolidation.
10:05And I think that will pay you dividend.
10:07Nainal Al-Kidwai, principal challenge from an industry perspective facing the finance minister.
10:12We have seen in the economic survey itself questions being raised as to why is private investment not doing more despite all the concessions and benefits that they have got.
10:22Is that a big challenge?
10:23How do you get private investment?
10:26Net FDI is another challenge.
10:28Are those issues that you believe the finance minister will have to address create a climate where people feel a bit more confident about investing in India?
10:37Raj, you are absolutely right.
10:39In fact, for a FICCI confidence survey, which was just conducted, the three things that industry CEOs put right on top were job creation as number one, capital expenditure, to your point, and the third was export.
10:55So, all three, to my mind, given the finance minister has always heard and understood what industry wants and requires, have got to be on her mind.
11:04So, the job creation, I think, becomes critical in light of tariffs, which have impacted high job-intensive sectors like apparel, leather, diamonds, and therefore how we help those industries through these times,
11:20but also look at intensive job creation industries, you know, so manufacturing to a lesser extent maybe, but the service sector, tourism, must figure in terms of the job creation element.
11:35On your point on capital expenditure, that is directly related to demand, and the GSD cuts are reflective in terms of seeing that demand go up.
11:45Capacity utilizations have risen to about 75%.
11:49The sweet spot is typically around 80%, and the sweet spot, I mean, that as capacity utilizations go north of 80%, industry begins to look at investing in more capital expenditures.
12:03So, it's directly related to demand for goods, and that can come both from domestic demand, which the GSD cuts have helped, but also from exports.
12:13And that leads me to the third point that industry CEOs have pointed out, which is exports.
12:19What we can and need to do to drive exports comes from making sure that we have cost-competitive industries, so that's every factor of production, cost of capital, cost of land, cost of electricity, cost of logistics, on the one hand.
12:36And on the other, the schemes that we have dedicated ourselves to, the PLI schemes, I believe SEZs are very critical going forward.
12:45And given the success of the electronics industry, one of the asks from FIKI has been, let's look at a large-scale electronics park on the style of Shenzhen, on the style of what Vietnam has created,
12:59where the supply chain, including the OEM, the manufacturers, all come in under one roof, and we provide the support of infrastructure and ease of doing business within these limits,
13:13and push for exports in areas like electronics, where we've already seen some success.
13:18Nilesh Shah, you know, as I said, I'm going to conclude with you, Nilesh, on this, on the first question, which is the principal challenge facing the Finance Minister.
13:27You track the markets very closely.
13:30What is the market expecting?
13:34I don't know about market, but let me put my expectation.
13:39India historically is known as Sonekichirya.
13:43But our present situation is more like Custodian Brook.
13:46Like Kasturi Mrook, we get about 2% of GDP by way of foreign direct investment.
13:55On a net basis, that amount is almost negligible.
14:00About 150% of our GDP is lying in precious metal.
14:04Majority of that is locked in Tijori parallel economy.
14:08I really want Finance Minister to think out of box and bring the savings, which is locked in the Tijori, into the bazaar.
14:18That can raise tax revenue for the government, which will allow them to spend money on capital expenditure and infrastructure.
14:25It will also put money in the pockets of entrepreneurs.
14:30They will be able to spend or they'll be able to invest.
14:33At one shot, we will be able to unlock our frozen savings and benefit economy from a growth point of view.
14:43Finance Minister has trinity of impossible in front of her.
14:48Keep on spending money on capital expenditure because private investment is subdued.
14:53Yet maintain the path of fiscal prudence because you have promised to bring down debt-to-GDP ratio to 50% by F531.
15:01And this can be achieved by raising non-tax revenue, asset monetization, divestment or converting Kasturi Mrook to Sone Ki Chidia.
15:13I like the Sone Ki Chidia analogy as well.
15:18But let's hit, you see, it's all very, I think everyone knows the concerns, the challenges in a way.
15:25But how do you, how do you initiate?
15:27The word reform has been used by several of you.
15:29So I'm going to ask you for specific reforms that you would have.
15:33Neelkan, you go first.
15:34What is that specific reform?
15:36The Prime Minister speaks of a reform expressed in 2025.
15:39And yes, there have been attempts where the labor code, for example, kicks in now, in a month or so.
15:47Do you believe that enough is being done?
15:49And what would you now like to see to in a way give the animal spirits of the economy, of the investors,
15:57an opportunity to actually put their money where their mouth is in a way?
16:02So the very fact that the pace of fiscal consolidation is now easing.
16:08So we did about 80 basis points of explicit consolidation in FY25.
16:14If you include the off-balance sheet changes on the GST compensation sets, FY25, the fiscal year that ended in March 25,
16:22was under 30 basis points of fiscal consolidation.
16:25This year, we had 40 basis points of fiscal consolidation.
16:28In the next year, the fiscal consolidation will be lower.
16:31So in a way, the government is now done with the hard miles on fiscal consolidation.
16:38And therefore, the economy should start doing better.
16:40So there is not, I think, any pressing need to do all the fiscal stimulus in the budget itself.
16:47But you're absolutely right.
16:48I think the working environment, operating environment, from what I see, a number of the recommendations from the Rajiv Gova committee,
16:57which is giving recommendations on a frequent basis.
17:01It's not a one-time committee.
17:03There are several of them, including the rescinding of quality control orders, which seems very nerdy and too detailed.
17:09But I think the impact on some sectors, especially like apparel exports, can be substantial.
17:15So there are many such measures that are already underway.
17:18It would be great if some of those also are further announced in the budget speech.
17:25As we discussed earlier, there's not much room for fiscal giveaways and not much of flexibility on the budget side.
17:33And the government has attempted to make budgets much more predictable than they used to be, which is a good thing.
17:39And therefore, a number of the exciting features can come in the budget speech.
17:43And in that speech, in terms of reforms, I think greater clarity and certainty on the taxation side.
17:51This is something that, including some of the decisions that recently came from the Supreme Court,
17:57there are new types of concerns which are emerging among investors.
18:01I think certainty on the direct tax side, simplification of procedures and processes, decriminalization of many of the potential offenses.
18:14So we are aware that many such attempts are underway in the government.
18:18They are exploring many such changes.
18:20Easing those would be too much detail.
18:23It's not very good for headlines, but they can have a substantial impact on the growth momentum or the medium term.
18:29You know, because, Sajid Chinoy, a word that I heard in Davos last week was not ease of doing business, but the speed of doing business.
18:35And yet I hear from MSMEs that many of the regulatory compliances are still far too burdensome.
18:41So it's the first instance, you believe reform, how do you make it, speed up doing business if you have so many regulatory compliances still in place?
18:52Well, Ajdip, you're right.
18:53I think, you know, the whole focus on deregulation from the economic survey, you know, is to try and improve the ease of doing business.
19:00And it's in a world where there's so much Chinese excess capacity, which threatens our small, medium enterprises,
19:06you don't want to shackle these SMEs by giving them more compliances.
19:09But let me ask you an original question. What specific reform does one advocate?
19:13It's very clear to me what the near-term objective should be.
19:16We all agree the near-term objective has to be to jumpstart private investment.
19:21So the question is, what is ailing private investment?
19:24And in my mind, it's basically demand visibility.
19:28Palance sheets are very strong, cash levels are high, profits are high.
19:31But in a world with so much excess capacity in China, businesses need to see more visible demand.
19:37A lot of that demand has to come from exports.
19:41You know, I've said this before, only 13 economies in the last 100 years have grown at an average of 7% for 20 years.
19:49And those 13 economies had one thing in common, very strong export growth.
19:53And, you know, I'm very encouraged that in the last six months, the government has not succumbed to export pessimism.
19:58And it's on this, you know, a raft of free trade deals have been signed.
20:02But the question is, what do we need to do to succeed and to create a force multiplier for those free trade deals?
20:09And in my mind, the specific reform has to be to clean up the customs duty part.
20:15You know, the oldest adage is an import duty is like an export tax.
20:19So I think this is a wonderful opportunity on the back of all these FTAs for the budget to attempt a significant simplification and cleaning up of import duties, tariffs and non-tariff barriers.
20:35If in a world of global value chains, it's only when you get that ease of imports will you be able to succeed on exports.
20:41I think that's a very tangible thing the government can do.
20:44It will reinforce the impression that we are serious about export-led growth, you know, in this difficult and hostile global environment.
20:53I'm going to put up a graphic in a moment also, of course, of the falling rupee, because there are concerns of that.
20:59And the economic survey also admitted that the rupee is punching below its weight.
21:04But, Pranjal, what is that key reform that you would like to see to ensure that we have a test match mood and not T20?
21:11Yeah, I'm going to follow on that analogy.
21:15I think we've taken some very good steps on external reforms already.
21:19We were dragging our feet on many of these trade agreements, but we've signed several of them, one with EU, one with UK, New Zealand and, you know, many more in the offing in the next year or so.
21:29So I think that's great.
21:30We've cancelled a lot of the quality control orders.
21:33We seem to be, you know, having a softer approach to China.
21:36At least, you know, we've resumed some of the flights and all of that.
21:38I think these are sort of great ways to integrate back with global growth.
21:44My sense is that I think this was the missing piece why private investment wasn't taking off.
21:49Exports were very weak.
21:50But then there is one thing we've still not done.
21:53And I'm hoping that this is something we take forward, which is look east.
21:58All of this while we are looking west.
21:59We are having trade agreements with, you know, with the EU, with UK.
22:05But what about looking east?
22:07What about a relationship with ASEAN, where a lot of the manufacturing happens?
22:10Can we partner with ASEAN in this global value chain?
22:14Can we be more open to Chinese FDI?
22:17Perhaps not in very sensitive or strategic goods.
22:19But what about mid-tech goods, like textiles, footwear, furniture?
22:24I think a lot of partnerships can happen here.
22:26Look at Vietnam, getting all of these Chinese FDI in mid-tech goods and growing 7, 7.5% per year.
22:32I think these are great opportunities out there that we should really try to get.
22:37And the final one is the rupee.
22:38I'm very glad that it came up in a big way in the economic survey.
22:42I think the currency at this point depreciating is not a bad thing because it's an offset to this 50% tariff that we have from the US.
22:51It helps make our exports competitive.
22:53You will never have, you know, any economy really increasing their exports over time with a very overvalued and a very strong currency.
23:00So, I think these are good steps.
23:03We are making the right noises.
23:05The economic survey had a lot of gold in it.
23:07And my sense is I think we're on the right track.
23:09We just keep working on all of these reforms.
23:12You know, before I, just to push you on the point you made about China.
23:16Do you believe, therefore, and anyone can please feel free to dip in on that.
23:21Sajid, if you want to respond to what you heard from Pranjal, because you also spoke just now about, earlier about the need to be perhaps a little bit more adventurous.
23:30Are you saying that we should be also looking at, do you agree with Pranjal, that we should be looking east as well, not just at an EU deal,
23:37but strengthening, looking at possible ways of strengthening trade ties with China where we have a huge trade imbalance at the moment?
23:44Is that for me?
23:49Yes, yes, go ahead, Sajid.
23:50No, absolutely.
23:51I completely agree with Pranjal in the following sense.
23:54You know, the most dynamic region of the world in the next 20, 30 years is going to be Asia.
23:59Most global growth is going to come from Asia.
24:01So, we need to do two things.
24:03A, we need to integrate better with Asia and have more free trade agreements with them.
24:07And I've been advocating, we should be joining next after the EU deal, the largest, among the largest free trade regions, frameworks in the world, which is the CPPTP, which has got 15% of global trade flows through that.
24:22So, that would be the next goal.
24:24With China, you know, the fact is, we have to learn to live with China.
24:28China has got the kind of excess capacity that nobody else has.
24:32It has the manufacturing prowess and the technological capability that nobody else has.
24:36So, India will be very reliant on Chinese intermediate goods for a long period of time.
24:41The choice we can make is, do we want to import that or do we want to attract more Chinese FDI?
24:47And I'm very much in the latter camp that, you know, I understand geopolitical considerations, but we should be thinking of easing press note 3 and attracting more Chinese FDI.
24:57That does two things.
24:58You get, there will be some technological transfer and that value add, a lot of that value add will accrue to India.
25:05It will create jobs in India rather than us importing from China.
25:09So, we have to learn to create a better relationship between these two.
25:13One final thing I'll say, Rajdeep, you know, a lot of hand-winging about the rupee.
25:16The rupee is a symptom.
25:18What India needs to work on is on attracting capital flows and stable capital flows on foreign direct investment.
25:25And some of the things that have been said, including simplifying the tariff regime, import tariff regime, you know, simplifying some of the restraints in China will help us attract more FDI.
25:37Soumya Kathi Ghosh, what structural reforms are needed to sustain the FDI inflows in a volatile global environment?
25:44I look at RBI data, November 2025 saw net FDI outflow of $446 million.
25:51This comes on the back of $1.67 billion of outflow in October.
25:55So, this is another major challenge.
25:58Do you see the budget providing any kind of direction in terms of structural reforms that are needed?
26:04Yeah.
26:04Thank you, Rajdeep.
26:05I think I will venture out a little differently in terms of addressing the reforms which needs to be done at this point of time.
26:11While I agree with the fact that custom-dress rationalization is the need of the hour,
26:15because we have done on the direct taxes first, then you have addressed the indirect taxes.
26:19Now is the time to clean up the customs stack.
26:22But apart from that, on the rupee front, if you are asking me, from the last January 25 till January 2026 till today,
26:29there has been total outflow of around $17 billion.
26:32So, as long as this portfolio, its capital flow doesn't stabilize, I think I don't see the rupees settling soon at the current level.
26:42It will continue to be volatile and it will also depend on how the pace of the other trade deals.
26:48No, but should we be concerned about it?
26:50Some of the guests suggest we shouldn't be too concerned about it.
26:54Do you believe we should be concerned about a volatile rupee?
26:58See, at the end of the day, I think there is both an yes and a no to it.
27:03Yes, there is some part, there should be some, a little amount of concern in the sense that
27:07if the rupee continues to depreciate, there could be a self-fooling prophecy of declining it further.
27:12On the other hand, the argument that rupee could act as a shock absorber is also correct.
27:16But in my sense, I think continued depreciation of the rupee also sometimes creates a self-fooling prophecy
27:22which could take it down to lower levels and which is exactly has been emphasized in the economic survey
27:27where we are saying that the rupee is actually punching much below its weight.
27:31Because if you look at the trade deficit data of the last year and this year, it is hardly any different.
27:36So, there is no macroeconomic reason to suggest that the rupee should be depreciating.
27:40So, keeping aside those facts, I think there are a couple of reforms which I would like to mention.
27:45I think the first thing is on the agricultural sector.
27:48I think for the last couple of years, we have done a lot on the SME sector.
27:51We have introduced a credit guarantee scheme which has been largely successful.
27:55I think now is the time for the agricultural sector maybe to unveil an omnibus credit guarantee scheme
28:00which exists from the SME sector and also to rewind the agricultural value chain in the Indian context
28:06so that the sector gets fund and investment which is unfortunately a little absent in India.
28:13The second important thing which is also very important for a country like India
28:17for the ease of living is the urban infrastructure.
28:20You have seen that how cities after cities in India last year has been ravaged by floods
28:26and urban infrastructure so I think it is high time now that the local bodies, specifically
28:30the urban and rural local bodies and also the government takes up the reforms of the
28:35urban infrastructure in the right earnest.
28:37I think the government has made the move in the right direction in the past.
28:40It is now high time that is actually operationalized in it.
28:43The final point which I will mention is also a very important point is that I think the government
28:47has introduced a very successful land scheme, cardholder scheme which is called the
28:52shamikta scheme for the rural households.
28:54I think the time has come possibly for the urban households to have a scheme like that.
29:00If we can introduce a scheme whereby you do property cards to the urban population that
29:05actually would also help in urbanization making it competitive for the industry to know which
29:11urban piece of land they can use for industrialization because as of today you know it is a very politically
29:17sensitive issue in the Indian context this land reforms or this taking up lands for industrial
29:23purposes. So I think some sort of reforms in this sector would help a long way in making the urban
29:30land market competitive and also help in the urban infrastructure process which we badly need today.
29:36You know Nainalal Kidwai again from Davos, one senior global economist told me if there were three
29:43things he would do for the Indian economy it would be find ways to increase rural productivity, look at urban
29:50governance and look at skilling. Now these are three areas which the budget can't tackle all of this but if you
29:58were to pick one area where you believe the reform thrust now should be there what should it be?
30:05So I would just go back to an ask that comes every year and that is the whole area of tax clarity
30:13and it cuts across every industry. So you take the example of the GCCs, big service
30:21providers across the world, large employers, 1600 of them now in India. Is there clarity in every one of their
30:31minds on how transfer pricing will work, how ESOPs will work? What is that national framework and structure that they can
30:39plan on as they go forward and possibly as we look to attract more? So I do think that the way our tax
30:47regimes are very complicated muddy the works and it's going to be very critical to have a principle by which
30:54we can actually set these frameworks in advance so that companies come in not trying to evade tax but they
31:02get caught in the crosshairs of interpretation and then all the issues that follow. And related to that in
31:08reforms is the whole area of dispute settlement. I've seen a statistics which also says that
31:15the CITAs there's 40% vacancies therein. So we need to resource the departments, we need to make sure
31:23that the dispute settlement happens quickly and indeed cut down the sheer degree of disputes for which
31:28those reforms are internal and actually I think quite easy because we're not dependent on the rest of
31:34the world or tariffs or any of the headwinds outside. So let's sort these out. In fact in the same FICCI CEO
31:41survey, 80% of the respondents said customs reform. This is very much again in our space and something
31:51that we've just got to tackle. So looking at the way we handle our own house at times when we can't
31:59predict what's happening from outside in terms of tariffs may be important. And otherwise I agree as
32:05I had also said exports are critical. Skilling is of course important. In fact FICCI put forward a
32:13wonderful idea on a sort of youth skilling scheme where folks at the age of 21 to 30 can be deployed for
32:20public services. So they can come in for sanitation, for helping in rural surveys in various ways which
32:28brings them into the economy, gives them that earning and anything that comes into the earning mechanism
32:34also creates demand and therefore I would hope capital expenditure from the private sector.
32:40You know well a lot of schemes have been announced in recent time. The internship scheme for example was
32:44announced but when you look at the ground, those schemes actually haven't transitioned to the kind of action.
32:49Now this is not just the centre but the states. A lot of focus is on the union budget. I think state
32:55budgets and state finances need to be looked at but I'll give you Neelash, what is that big reform
33:03you'd like to see and then go to Neelkand. So the one big reform I would like to see is to set up ease of
33:10doing business commission, a regulatory authority where any entrepreneur who is burdened by compliance rules
33:17rules, regulation can reach out.
33:23I would like to coordinate across central state and local government to provide solution to the
33:29entrepreneur. It should also have authority to remove many of the unnecessary compliance burden.
33:36Ease of doing business commission, a commission where an entrepreneur can reach out 24 by 7,
33:42365 days a year is the need of PR.
33:46Okay, the ease of doing business commission. We'll try and get your audio fixed in a moment. But Neelkand,
33:52you're hearing these various ideas. As I said, there are lots of ideas and you cannot fault the Modi
33:57government for throwing up ideas. Smart start-up India, stand-up India. There was an internship
34:04scheme announced last time. Now, a lot of these schemes are well-intentioned, no doubt. But the
34:10execution at times, it depends on which part of the country. State finances are a big issue.
34:15We focus a lot on the union budget. The economic survey also expressed their concern about the number
34:20of states that are experiencing high revenue deficits. Does the budget need to give some kind
34:27of a signaling as well to the states? Let's see what the finance commission has to say. Remember that
34:35in all of this discussion, we are assuming status quo on the finance commission side. And this is
34:42around this budget, the 16th finance commission will also be submitting its recommendations. So,
34:50it is quite possible given that the fiscal largesse, the fiscal indiscipline that is very clearly
34:59visible in many of the states is hurting longer-term growth potential. It is up to the finance commission
35:06to actually create weights and measures, incentives and disincentives which influence the transfers to
35:16the states. So, it is quite possible... Because you see, because there's a feeling,
35:21just to push that, Neil Kand, is that the government's one eye, and it's been said in past budgets, has been on
35:27which states are going to the polls. And therefore, those states get in the budget. Also, schemes are
35:32announced for those states. You saw immediately after the 2024 elections, Bihar and Andhra Pradesh were the
35:37flavor of the season. Do we need, in a way, the budget to do that? Or do you believe the finance commission
35:43should be now looking at much more closely at the way states are spending money? The budget needs
35:48to give the big picture. Exactly. So, the budget does not have the discretion. So, the centre does
35:53not have the discretion to allot or allocate specific funds to states in the budget. So, the consolidated
35:59fund of India cannot make subjective decisions. So, some of the schemes that got a lot of publicity in
36:06the media for Bihar and Andhra Pradesh were about, you know, PSUs announcing specific projects that's
36:13not part of the consolidated fund. The state-specific measures and the incentives and disincentives need
36:19to be a part of the finance commission recommendation. So, if there are revenue deficit
36:23grants, if there are specific incentives that the finance commission can create, that if you're,
36:28you know, if you're capex to GDP so much, then you get maybe a few tens of basis points higher funds,
36:36which can, in its entirety, can be substantial in terms of the absolute amounts. I think those
36:42changes can happen there. The centre has created, in fact, this is something the economic survey also
36:47flags, that this one and a half lakh crore interest-free loan for states for doing capex has
36:54actually helped support the capital expenditure at the state level. So, if this was not the case,
37:00and this also comes with certain conditions, if you have to meet certain conditions to be eligible
37:04for this, if this was not the case, the state capex would have been a lot lower. There are very
37:10interesting charts in the economic survey as well. So, there are measures, maybe this one and a half
37:15lakh crores can be made two lakh crores, maybe there are some additional conditions that can be put in.
37:19But remember that, if you try to go too tight, you are actually creating a longer-term federal
37:30problem. So, one of the reasons the 14th Finance Commission had advocated against too much of
37:38discretion being given to the centre and allowing more fiscal freedoms to the states was exactly to
37:43let the federal policy work. In fact, what I would be a strong votary of is that the states themselves,
37:51of course, there's nothing to do with the union budget, but the states themselves focus a lot more
37:55on the state finance commissions and start thinking about near-three devolution because some of the
38:00challenges on the urban side can only be tackled at scale. You know, you can have the chief minister
38:07drive urban infrastructure and financing for one city or two cities, but the bandwidth will not be there.
38:13So, the only way to handle it systematically for 500 and 1,000 towns and cities is to allow
38:19near-three devolution to happen. But that's not a part topic for this union budget.
38:23Sure. You know, I just wanted to, for a moment, only focus on state finances because, as I said,
38:28we focus a lot on union budgets and don't look at state budgets across the country. But back to the
38:34big final question, what is your forecast for the Indian economy is a question I want to pose at the end
38:39to all of you in 2026? And importantly, the question that's been a running theme,
38:44how should the government respond to global headwinds? Sajid, you want to go with that? What is your
38:49forecast, therefore, for 2026? And an area we didn't speak about a bit, disinvestment. There's a lot of
38:56talk of deregulation and disinvestment being pushed through in this budget. What is your forecast for
39:02the Indian economy in 2026 in the first instance? A couple of things, Rajiv. One is that India is
39:08clearly experiencing cyclical recovery. Ranjul touched upon this, you know, 2025 saw lots of cyclical
39:14supports, your income tax cuts, GST cuts, rate cuts, regulatory easing, a strong monsoon, and that's
39:22going to drive growth for the next two or three quarters. But the budget needs to be thinking about
39:26the morning after. What happens when these cyclical impulses fade? And there, my suggestion for a long
39:33time is to be that if private investment has to pick up, you need to boost demand more structurally.
39:39You need to boost demand more structurally, both in terms of exports and in terms of consumption.
39:46We spoke about what needs to be done on exports. On consumption, really, it's about how do you
39:50boost labor incomes over the next decade? You know, we're in this crazy time where there's this race
39:57between capital and labor. And the only way that labor will be able to compete with this inexorable
40:03capital productivity is, you know, a mission-like mode on education, on skilling, on health. I know
40:09these are boring things. They've been said before, but I think this is absolutely crucial. Without that,
40:16you know, labor will struggle to compete with capital. Without that, we won't get the
40:20labor incomes that are going to drive consumption. So I'll just say that in the next few quarters,
40:24growth is going to remain strong. This is a cyclical upspring pickup, but we need to ensure
40:30that this recovery continues. I'll end with the, you know, with the analogy that Pranjal made on the
40:35T20 in the test match. You know, I think on macroeconomic stability, it's okay to be in test match
40:41mode, right, on fiscal bill buffers, monetary bill buffers. But when it comes to reforms,
40:46we have to think we're in a T20 match. We can't be on the reform front, taking a test match approach,
40:52because let me tell you in 22 years, by 2046 to 2047, our demographic dividend peaks. So the next
41:0020 years are going to be absolutely crucial. After that, our working age population goes to zero.
41:05And it's very hard as China is finding out to get seven, eight percent growth when your working age
41:10population goes to zero. So yes, on macroeconomic stability, go the test match mode. On reforms,
41:16we're in the midst of a frenetic T20 against a very hostile global backdrop.
41:20Dr. Ranjul, do you want to respond?
41:23Dr. Ranjul, I absolutely agree. And I would say that I think…
41:27Dr. Ranjul, And your forecast as well.
41:28Dr. Ranjul, Sure. I have a four-point agenda on the economy. Number one, restraint,
41:33have fiscal restraint, maintain your macroeconomic stability, very important in an uncertain world.
41:39Dr. Ranjul, Number two, continue with all of these external reforms you've been doing,
41:43like bringing down protectionism, signing trade deals, but please also look east, not just west.
41:49Dr. Ranjul, Third, all the domestic reforms that you're doing on deregulation is great.
41:54I call it hard reforms, but also think of the soft reforms, like tax certainty, which Niana Lal
42:00Kidwai was speaking about. And fourth, maintain a flexible exchange rate, because it can be the number
42:06one shock absorber at a time when there's so much of global volatility.
42:09I think if we follow these four, we're in a good way. In terms of GDP growth forecasts,
42:15because there's so much of uncertainty, you know, I would sort of put it in the
42:186.5% to 7% range. Yesterday's economic survey, you know, pointed at about a 7%.
42:25I would be a little lower than that. I just want to go in a little conservatively in a very uncertain year.
42:30Okay. Niana Lal Kidwai, your forecast for…
42:35Okay, Soumya, why don't you go first and then I'll come to Niana. Soumya Kanti Ghosh, your forecast for 2026.
42:41Yeah, I think on a growth perspective, we are actually for a growth rate of around 7% for the
42:48FY27. But as I pointed out earlier, I think we need to do the things which we're doing. We need not
42:56go for any extravagant things, because I think a lot of these extravagance and what is going to happen
43:00in the next couple of months, we're going to see from the countries like US in terms of
43:05geofragmentation. And that is only likely to increase. So in an increasingly fragmented world,
43:11when nothing is uncertain, I think what we can make certain is our policy trajectory.
43:16And apart from the various policies which other panelists have mentioned, I will again harp on
43:21a couple of things. First is that on the ease of living, I think on that ease of living, the
43:26government has actually initiated a lot of macro reforms. Maybe it's the now time for micro reforms
43:31from an urban infrastructure perspective. The second point, which I'd like to know, I'd like to say is
43:37that maybe now is the same time to go for some of the reforms, which are a little bit sensitive
43:43reforms. As I said to it, agriculture is one of the sectors where price discovery has almost been
43:47absent in the last couple of decades. We have tried to do it, but it is always a sensitive issue.
43:52And maybe it's now the time to come to do some sort of a price sensitivity, because a large part of
43:57the Indian population still lives in the rural areas. And finally, I think on the fiscal front, and
44:04as Neelkant was mentioning in terms of the finance commission, of course, the FC recommendation will
44:08be out in the next couple of days. But the only thing which we can say at this point of time is,
44:13it's important that we maintain on this part of fiscal consolidation, debt consolidation,
44:18and also on the part of the states also, because after all, India is an union of 28 states and the
44:23centre apart from the Indian territories.
44:25Is business bullish about 2026 or is business very worried about the uncertainty? Again,
44:33taking off from Davos, on camera, people say all is good. Most industrialists include will give 11
44:39on 10 to the budget, whatever Nirmala Sitaraman says. But there are those who privately speak
44:44otherwise. And there is a bit of a fear factor there, that there is concern because of the uncertainty and
44:49anxiety. I can only say, harking back to the same Fikhi survey, that the mood was pretty optimistic,
44:57that there is a belief that India will achieve the 7%. And I think it comes from some of the
45:04demand-related reforms that had set in over the last year. And the hope, therefore, that as demand
45:11builds, there will be reason to go in for more capital expenditure. And I would also like to believe that
45:19there is room, even while we look at fiscal constraint, to up infrastructure spend. And I know that these
45:27are contradictory, but I believe this is possible because finally, INVITs and REITs have taken off.
45:33And the ability for government to securitize its assets by chucking those assets which are indeed yield
45:42returning or interest-bearing. Throw them into these INVITs. And in the process, therefore, free up that
45:50money to go back into infrastructure. So while looking at fiscal constraint, to just make the infrastructure
45:58that's already there work for us to be able to create more of that infrastructure. Because infrastructure
46:04spend has been a huge success from this government. It brings logistics reductions. It helps industry.
46:12And as we've well seen, it kickstarts the economy. So I would hope that we will continue to see some
46:18reforms in the bond markets, which are again critical for by bringing in long-term finance and by maybe even
46:28tweaking again the capital gains tax on the way bonds and bond savings are indeed being treated. We bring
46:36the mojo back into our bond markets.
46:40Nilesh,
46:42are you bullish about the economy in 2026 or should we be very cautious?
46:48I'm bullish on the economy. Of course, there are worries in terms of monsoon. This year,
46:55we might get impacted by El Nino. But my expectation from the budget will be, it will be a budget
47:03where there will be a path to ensure that there is revenue surplus on a sustainable basis.
47:08And capex is higher than the net borrowing program. Last year, the budget capex was 11.2 lakh crore.
47:16And the net borrowing program was 11.5 lakh crore. I hope this year the net borrowing program is less than the capex.
47:24Okay. I just have a minute or two on the show. I, I thought we'll, uh, we'll do a, you know, if you were, uh,
47:31Nirmala Sitaraman, uh, would you be sleeping well at the moment for the next, uh, 24, 48 hours?
47:38Dheelkan Mishra, uh, would you want to be the finance minister in the times in which we live?
47:43Uh, it is definitely a very challenging task, uh, to, uh, maintain, uh, uh, on the course,
47:52sustain on the course of fiscal consolidation, uh, even at a time of severe global volatility.
47:57There are so many claimants for the limited fiscal resource that are available, uh, to actually use
48:02this opportunity of macroeconomic stability that exists within India to drive structural reforms,
48:08take long-term risks. So, uh, definitely a taxing job, but, uh, we've seen
48:13some remarkable success over the last six, seven years, and I think we should be optimistic
48:17about the future as well.
48:20Sajid Chinoy, would you sleep well if you were the country's finance minister over the next 24,
48:2548 hours ahead of a budget with global headwinds? Who knows what Donald Trump does tomorrow morning?
48:33At this point in time, no policy maker around the world can sleep well, given the global volatility.
48:37But, you know, I want to underscore the fact that India still, we shouldn't forget, uh,
48:41is still a relative beacon of macro stability. Uh, you know, our fiscal, uh, over the last few years,
48:46what we've seen with the government is to under promise and over deliver on the fiscal. So we have
48:51been gradually building buffers in the last few years, whether it's fiscal, whether it was monetary,
48:56whether it's the exchange rate. So I think we should take comfort from the fact that macroeconomic
49:00stability is assured and I'm sure the budget on, on Sunday will reinforce that. The question is,
49:06you know, as we remain conservative of macro stability, how do we also simultaneously become
49:11more adventurous and continue the reform impetus that, you know, that has started the last four or
49:17five months. I think that balancing act will be the key challenge.
49:19Sajid Chinoy, okay. So final word to Pranjal, since you gave the T20 test match analogy. Uh, you said
49:27finance minister should look at this as test match and not T20. There's also 50 overs. So you can, you can
49:33take, you need both, don't you? You need to have a few things that you accelerate and a few things
49:39you're cautious of. Would that be a more balanced approach to take? Yes, basically, you know,
49:45continue to persevere was, was, was my point. And, you know, if I was finance minister, I would sleep
49:50well because, uh, uh, uh, the, in the country is doing a lot more reforms right now than we were doing
49:56same time last year. We've been able to do things like signing trade deals with countries in which we
50:01were dragging our feet for 10 to 20 years. So I think we've come a long way and there's a big task
50:06cut out for the future as well. So I need to sleep well. So I'm sort of a hundred percent energy for
50:10that, that too. So I think, you know, it's a very difficult time, but we're doing the right things.
50:15I think we're doing reforms. We have to accelerate some, we have to persevere on some. Uh, I would say
50:20again, this is a test match. Okay. Let's leave it at that point. Uh, I think it isn't easy in these
50:28times of global headwinds, uh, and the uncertainty it causes, but I am glad that we had such a fine
50:33panel of voices who've given us a chart of what lies ahead. And I want to thank each and every
50:39one of you for taking the time for joining us on the budget, uh, round table ahead of union budget
50:452026. Thank you to each and every one of you and to you, the viewers. Thanks for watching.
50:50Stay well, stay safe, jahin namashka.
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