Press Release
Vyomini Nathwani
The IMPRI Center for the Study of Finance and Economics (CSFE), Impact and Policy Research Institute, New Delhi, hosted an interactive panel discussion on “Indian Economy and Union Budget 2026–27” on February 7, 2026, at 6:30 p.m. IST under IMPRI’s 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026–27, bringing together leading economists and policy researchers to examine the growth outlook, fiscal strategy, labour-market pressures and structural reforms embedded in the latest Budget.
Moderated by Prof. Subhomoy Bhattacharjee, Consulting Editor at Business Standard and Professor of Practice at OP Jindal Global University, the session featured Dr. Rajeswari Sengupta, Dr. Sanjay Kathuria, Prof. Pooja Misra, Mr. T.K Arun and Ms. Yuvika Singhal, who offered sharply contrasting but complementary assessments of India’s macroeconomic trajectory. The discussion ranged from employment creation and urban transformation to fiscal consolidation, export competitiveness and Centre–State finances, reflecting the scale of challenges confronting the economy at a moment of global uncertainty.
Lost Opportunities and Questionable Returns of Schemes
Dr. Rajeswari Sengupta, Associate Professor of Economics at IGIDR, opened with a sobering macroeconomic assessment, cautioning that headline growth of around 7 per cent masks deeper structural frailties. Anchoring her remarks in labour-market data, she pointed to CMIE and ILO estimates showing low workforce participation, high graduate unemployment and the persistence of informality as central constraints on India’s growth model. She noted that sluggish manufacturing absorption, weakening capital inflows, record foreign-portfolio outflows, stagnant FDI ratios and a depreciating rupee together signal eroding investor confidence and rising vulnerability to global shocks.
Turning to the Union Budget, she questioned the efficacy of recent employment and skilling schemes, slow fiscal consolidation, rising borrowing and selective industrial interventions, warning that ambitious announcements have often failed to translate into results on the ground. In her view, the China+1 opportunity has largely bypassed India because regulatory frictions, uneven reform signals and deteriorating ease of doing business continue to deter private investment. She closed by urging a neutral policy environment, greater trade openness and a sharper focus on private-sector job creation to ensure India does not squander its demographic window.
Exports, Competitiveness and Structural Reform
Dr. Sanjay Kathuria, Visiting Senior Fellow at CSEP and an Oxford alumnus, read the Budget as an exercise in continuity marked by caution, saying employment generation remains its weakest link despite headline macro-stability. While he welcomed capital expenditure touching a decade-high 4.4 per cent of GDP, he stressed that weak execution, rising debt and cumbersome customs procedures could blunt its impact on productivity and private investment. Export outcomes, he noted, reveal a policy skew toward capital-intensive sectors even as labour-absorbing industries such as textiles have stagnated near USD 35 billion for years, a pattern he linked to tariff protection and production-linked incentives.
He also drew attention to persistent input-cost pressures, more than 700 quality-control orders operating as non-tariff barriers, and what he described as an “anti-export bias” encouraging firms to prioritise domestic markets. With millions entering the workforce annually, he warned that India risks repeating past failures to seize global trade openings unless scale disincentives, labour rigidities and regulatory hurdles are addressed in tandem. He summed up his position through the lens of “continuity, caution and concern over competitiveness,” calling for incentive correction, stronger human-capital investment, higher female labour participation and regionally anchored industrial strategies.
Urban Transformation and Productivity-Led Growth
Prof. Pooja Misra, Professor of Economics and Area Chair at BIMTECH, framed the “Viksit Bharat 2047” agenda as an urban-centred development strategy focused on productivity-enhancing infrastructure rather than simple mobility projects. She highlighted the ₹2-lakh-crore capital-expenditure push and sectoral bets on semiconductors, biopharma, rare earths and high-speed rail, while stressing that execution would determine whether these investments genuinely crowd in private capital. With cities accounting for nearly 60 per cent of GDP, she said, empowered municipal governments, integrated logistics networks and modern transit systems are indispensable to realising agglomeration benefits without slipping into congestion and middle-income traps.
At the same time, she questioned whether the ₹1-lakh-crore Urban Challenge Fund had moved beyond announcements and criticised the proliferation of schemes that blur accountability and monitoring. Pointing to USD 29 billion in capital exiting the economy and weak female labour-market outcomes, she maintained that productivity-led growth must rest on deeper investment in health, education and higher-quality employment across both cities and villages. She closed by noting that greater fiscal autonomy for mayors and states, alongside disciplined financial management, will be critical to sustaining domestic investment momentum.
Fiscal Arithmetic and Services-Led Expansion
Ms. Yuvika Singhal, seasoned economist at QuantEco Research, described the Budget’s defining feature as its long-term orientation, cautioning that fiscal adventurism could unsettle markets at a time of shifting global trade patterns. Parsing the numbers, she noted plans to bring the debt-to-GDP ratio toward 50 per cent by FY31, a fiscal deficit near 4.2 per cent and looming pay-commission liabilities of ₹2–2.5 trillion.
She warned that swelling State and PSU borrowing—potentially beyond ₹31 trillion annually—could strain bond markets, prompting calls for innovative RBI operations and clearer signalling to institutional investors. At the same time, she highlighted the growing primacy of services exports, which overtook merchandise shipments in December 2025, and welcomed tax incentives and FDI liberalisation for GCCs and AI-driven sectors.
While projecting real growth near 7 per cent with inflation around 4 per cent, she cautioned that rupee depreciation, commodity pressures and unresolved sub-national fiscal risks could complicate the outlook. She closed by saying that “stability is the cheapest subsidy,” adding that only sustained reforms beyond Budget documents will allow manufacturing and services to advance together and absorb India’s expanding workforce.
Skilling, Inflation and Federal Finances
Prof. Subhomoy Bhattacharjee, used the moderator’s vantage point to foreground the Budget’s skill-development ambitions and emerging federal-finance questions. He highlighted projections of six lakh apprenticeships in 2026–27 and a plan to lift vocational enrolment to 42 per cent from under 12 per cent today, framing these as potentially transformative if matched with labour-market absorption.
Yet he underscored the enduring gap between training pipelines and productive employment, warning that mismatches could blunt the demographic dividend. Drawing on RBI assessments, he cautioned that inflationary pressures may erode rural purchasing power and heighten volatility in an uncertain global environment. He also pointed to the 16th Finance Commission’s work on Centre–State transfers and prospective GST restructuring as pivotal to India’s evolving fiscal architecture. His remarks situated the panel’s discussion within a broader debate over whether fiscal federalism, skilling reforms and price stability can be aligned into a coherent medium-term growth strategy.
Conclusion
Across the discussion, speakers aligned on the scale of India’s opportunity and the risks of complacency, highlighting persistent employment shortfalls, uneven competitiveness, fiscal constraints and execution gaps in public programmes, even as they diverged on how far current fiscal choices and sectoral strategies can deliver results. While the Budget was credited with signalling continuity, infrastructure ambition, services incentives and a long term orientation, panellists stressed that outcomes will hinge on regulatory reform, state capacity, urban governance and private sector confidence. Exports, female labour participation, productivity growth and services sector expansion emerged as common fault lines shaping the next phase of development, reinforcing the view that macro stability alone will not suffice without deeper structural change.
Speakers warned that weak manufacturing absorption and low female workforce participation risk squandering India’s demographic dividend, but maintained cautious faith in the Viksit Bharat vision, which provided policy moves decisively away from headline heavy scheme proliferation toward fixing core structural bottlenecks in trade, taxation, skilling systems, urban governance and firm level incentives. The closing message was clear that India’s growth ambitions will be judged not by announcements, but by whether delivery, competitiveness and job creation finally converge at speed.
IMPRI’s 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27
IMPRI 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27
Indian Economy and Union Budget 2026-27
Acknowledgement– This article is written by Vyomini Nathwani, a Research Intern at IMPRI.
