MUMBAI: Analysts at Reserve Bank of India (RBI) welcomed the measures announced in the fiscal 2026 budget as "conducive for robust and sustainable growth". Listing the consumption boost by way of raising the income tax exemptions limit and the many structural reforms which will go in augmenting investments in critical sectors, as the positives in the Budget, they also said the rationalisation of taxes and expenditure will help the government maintain a stable macroeconomic environment.
In an article in the monthly bulletin released on Wednesday, RBI in-house economists said the "Budget reaffirms the government's commitment to fiscal discipline while fostering inclusive, long-term economic growth which will help the nation become a developed one by 2047."
"Towards this objective, the budget has announced several measures under four engines of growth--agriculture, small businesses, added investments, and exports propelled by innovation and structural reforms," said the article, which is not the official views of the central bank.
"Through structural reforms, augmented investments in critical sectors, and the rationalization of taxes and expenditure, the government seeks to maintain a stable macroeconomic environment conducive to robust and sustainable growth," the article said.
The government has continued with its focus on capex alongside consumption boosting measures which would help the economy to improve its growth momentum, said the article, adding with a fiscal deficit target of 4.4%, the budget balances consolidation and growth objectives.
On the government plan to move away from targeting fiscal deficit and focus on debt-GDP ratio as a medium-term fiscal anchor going forward, the article said it will help "preserve macroeconomic stability."
In an article on the quality of public expenditure and its socio-economic impact, its author evaluates the trajectory and quality of public expenditure since the July 1991 reforms.
Noting that the expenditure composition has undergone significant transformations, shaped by structural reforms and external shocks, the article said the post-liberalisation phase (1991-95) saw fiscal consolidation at the cost of capital and developmental spending, while the pre-FRBM years (1996-2003) were marked by rising debt burdens and stagnant public investment.
The implementation of fiscal responsibility frameworks (2003-08) coincided with higher capital outlays, improved these ratios, and reduced interest payments, underscoring the benefits of rules-based discipline.
"Prudent expenditure composition--prioritising capital formation and developmental outlays-remains pivotal for sustaining growth and equity. The recent emphasis on infrastructure investment and fiscal discipline has bolstered resilience, and achieving long-term sustainability necessitates balancing immediate sustainability necessitates balancing immediate spending needs with strategic investments," says the article.
In an article on the state of the economy, the author says the economy has regained the momentum and is poised to be sustained as a strong rural demand is expected to receive a further fillip from the robust performance of the agriculture sector.
Urban demand is also poised for a recovery, tracking decline in inflation as well as a boost to disposable incomes from the sizeable income tax relief announced in the budget, it said.
The budget measures, which is aimed at fuelling four engines of growth - agriculture, MSMEs, investment and exports,-- are expected to boost medium-term growth prospects.
"The budget prudently balances fiscal consolidation and growth objectives by continued focus on capex alongside measures to support consumption while providing a clear roadmap for debt consolidation," concludes the article.