Union Budget Likely To See Continuity in Centre's Capex Push: HSBC Report

The upcoming Union Budget is expected to maintain continuity in the government's capital expenditure (capex) push, even as policymakers operate within a constrained fiscal and policy environment, according to a budget preview report by HSBC Mutual Fund.

A capex expenditure worth Rs 11.21 lakh crore (or 3.1 per cent of GDP) was earmarked in 2025-26, rising year-on-year.

The report noted that while the government has limited room for large policy shifts or major announcements, expenditure priorities are likely to remain focused on sustaining growth through public investment. 

"On the expenditure front, we may continue to expect continuity in the Centre's commitment to CapEx," the report said, underscoring infrastructure spending as a key pillar of economic strategy despite ongoing fiscal consolidation efforts. 

HSBC Mutual Fund is of the view that the Budget is unlikely to introduce major changes to tax policy, given the limited policy levers available. 
"Unlikely to see major policy changes or big-bang policy measures at this Budget given the limited policy levers," it said.

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Transfers to states and the use of long-dated, interest-free loans from the Centre to the States are also expected to remain in focus.
From a spending perspective, the report identified defence, agriculture and rural development as sectors that could see targeted allocations, alongside increased attention to technology and artificial intelligence. 

The report also pointed to the possibility of continued support for manufacturing and exports. 

"Fiscal discipline and policy continuity following last year's Budget may in itself be growth supportive. Having said that, given the persistently high tariffs, we think the government might come up with steps to support tariff-hit export sectors - either by way of subsidies, incentives or targeted support, possibly, in its recently established Export Promotion Mission," it said.

Policy continuity amid gradual fiscal consolidation is likely to define the budget's approach, with capex remaining central to the government's growth strategy in the year ahead, the report asserted.

As has been the convention, the Union Budget for 2026-27 will be presented in the Parliament on February 1, 2026.