What a difference a year can make. This time last year, the US-India trade deal seemed imminent, given the expected pace of negotiations. Fast forward 12 months: the announcement of India and the European Union (EU) reaching a free trade agreement (FTA), touted as the “Mother of all deals”, marks a landmark moment, culminating nearly two decades of negotiations.
Looking at it, a lot has changed during that time. Geopolitical tensions are shaping the new normal, tariffs are a boardroom topic, supply chain routes have become a map of ‘Westeros’, and unilateralism seems like the only way out. The consequential impact on trade margins, shipping lanes, and currencies is undeniable, let alone the revolution led by artificial intelligence (AI), which is changing the way businesses function as we speak.
Yet in the annual KPMG CEO Outlook Survey 2025, Indian CEOs’ confidence in their own organisations has surged to 83%, a remarkable jump from 68% last year, even as global economic confidence has tempered. This goes to show that India’s story is one of remarkable transformation, with its gross domestic product (GDP) growth rate for FY26 expected to be around 7.4%, a stark contrast to the global average of around 3.3%. This is not surprising, given the interplay between public investment, technology proliferation, and steady consumption, all supported by proactive and consistent federal policy as well as attractive investment incentives.
We’re coming to that time of the year when the Finance Minister will present the Union Budget 2026. Let’s look back to see the trajectory; just the last two Budgets can set a precedent. Focus from the government has been on steady capex infusion and prudent fiscal discipline to create growth, employment, deregulation, and simplification to bring medium-term growth. Last year’s Budget brought the big bang announcements in relief under the new personal tax regime (nil tax on income up to Rs 12 lakh) and a new debt anchor roadmap to bring central government debt-to-GDP to around 50% by FY31. Here are some areas that should be a top priority this year, looking at the engines, not aggregates.
Services remain the flywheel, contributing 55% GVA (Gross Value Added) and power exports with double-digit growth. Global Capability Centers (GCCs) are the anchor, having morphed from cost arbitrage to innovation hubs. We know the numbers: 1,800+ centers, around 2 million employees, and growing exponentially. The need of the hour is for a national-level framework to focus on policy, infrastructure and talent.
Manufacturing is the supporting actor which needs to take the lead. The sector contributes around 17% to India’s GDP, with the ambition of increasing the number to 25% by 2047. The government’s impetus on Make in India has enabled considerable progress in the past few years, electronics certainly being a success story with smartphone exports reaching record highs, making it India’s breakout merchandise story. But real competitiveness comes from integration in global value chains, and the next wave of the Production Linked Incentive (PLI) scheme to move from output-based to value-addition-based, can have a knock-on effect on exports, which are still dominated by finished goods and not components that lead into global production networks.
An underlayer to both services and manufacturing is the infrastructure, where we have made substantive progress. Roads, airports, railways and ports have taken a big leap over the past decade, where we have multiplied coverage to ensure last-mile connectivity. A cascading effect has been felt in areas, for example, data center capacity, which could reach around 1.7 GW by 2026, which is at the back of favourable policies, global investments, and AI-led growth. Still, India generates around 20% of global data but hosts only 3% of global data‑centre capacity, making it even more critical to ensure that India’s data sits in India’s data centres. Granting core infrastructure status to enable priority clearances and long‑tenure infra finance and clearing tax uncertainty around Transfer Pricing and Permanent Establishment ambiguity, will be a fillip for a sector which should be of strategic and national importance.
What will fuel this drive is capital, which is quite literally where the ‘buck’ stops. The government is expected to keep its capex build, but private investment is critical to accelerate progress. Our gross FDI (foreign direct investment) inflows increased 16% year-on-year to $50.36 billion in H1 FY26; there has also been a higher repatriation of profits by investors and FDI outflows due to global market volatility. Recent news of potentially raising the cap on FDI for licence-holding defence firms under the automatic route to 74% from 49% can attract more defence companies from partner nations and is a bold step. The 100% FDI limit in insurance was one of the main announcements of the Budget 2025, and there needs to be a similar concerted approach to strengthen clarity in policy and consistency in execution to amplify this trajectory.
We have the tools and the ambition, the most consequential shift in my mind will come from how we move from scale to value. This will require calibration of elevating what is working and building momentum on what needs work with targeted incentives, local supplier and manufacturing ecosystem, so we make this thrust into a habit. Which will also be a key driver for ‘Aatmanirbharta’ or Self-reliance, which our Prime Minister has been vocal about for years. Especially critical in today’s times when an unpredictable barrier could disrupt but should not derail.
In essence, it means working for the medium term to build for the long term. Speed with stamina, ambition with prudence, relentless but resilient. India’s journey towards Viksit Bharat will be a relay, where every Budget creates a policy handoff to the next one to create velocity which accelerates progress and ambition. We must not let out foot off the pedal but ensure to ‘Keep our eyes on the road and hands upon the wheel’—just as the legendary Jim Morrison from The Doors once said.
Source Name : Economic Times