Budget 2026: Institutional reforms, fiscal consolidation crucial to sustain India’s growth momentum, says CII

The Confederation of Indian Industry (CII), a prominent industry association, has put forth its recommendations for the Union Budget 2026, urging the government to prioritize fiscal discipline and institutional reforms. This intervention comes at a crucial juncture, as India navigates a complex global economic landscape marked by uncertainties, while simultaneously aspiring to sustain its robust growth momentum and achieve the vision of a 'Viksit Bharat' (Developed India) by 2047.

**Background Context: The Annual Financial Exercise and Economic Imperatives**

The Union Budget, formally known as the Annual Financial Statement under Article 112 of the Indian Constitution, is the government's comprehensive financial plan for the upcoming fiscal year. It outlines anticipated revenues and proposed expenditures, serving as a critical policy tool to steer the economy. Ahead of its presentation, the Ministry of Finance engages in extensive pre-budget consultations with various stakeholders, including industry bodies, economists, trade unions, and civil society groups. These consultations are vital as they provide the government with diverse perspectives and feedback, helping to shape policies that are inclusive and effective. India's economic trajectory since the 1991 reforms has been characterized by increasing integration with the global economy. While this has brought immense benefits, it also exposes the nation to international volatilities. In recent years, challenges such as the COVID-19 pandemic, geopolitical conflicts, and global inflationary pressures have underscored the need for resilient economic policies and a strong fiscal foundation.

**CII's Recommendations: A Blueprint for Fiscal Health and Growth**

CII’s recommendations for Budget 2026 are centered on several key pillars: debt sustainability, fiscal transparency, enhanced revenue mobilization, controlled public spending, achieving a higher tax-to-GDP ratio, and strategic disinvestment. These are not isolated suggestions but form a cohesive strategy aimed at strengthening India's macroeconomic fundamentals. Debt sustainability refers to the ability of the government to service its debt without compromising future economic growth or fiscal stability. Fiscal transparency involves clear and open reporting of government financial activities, fostering accountability and trust. Revenue mobilization focuses on broadening the tax base and improving collection efficiency, while controlled public spending ensures judicious allocation of resources, particularly towards productive assets and essential services. A higher tax-to-GDP ratio indicates a healthier fiscal position, allowing the government more headroom for investment and social welfare. Strategic disinvestment, a long-standing policy tool, involves the sale of government equity in Public Sector Undertakings (PSUs) to unlock value, reduce the fiscal burden, and promote efficiency.

**Key Stakeholders and Their Roles**

Several key stakeholders are involved in this process. The **Confederation of Indian Industry (CII)**, as an apex industry body, represents the interests of a wide spectrum of Indian businesses. Its recommendations carry significant weight as they reflect the collective voice and concerns of the private sector, which is a major driver of economic growth and employment. The **Government of India**, specifically the **Ministry of Finance**, is the primary recipient of these recommendations. It is responsible for analyzing, deliberating, and ultimately incorporating (or rejecting) these suggestions into the Union Budget. The **Parliament of India**, through its legislative process, debates and approves the budget. Finally, the **Indian economy** as a whole, encompassing businesses, consumers, and investors, is the ultimate stakeholder, whose well-being is directly impacted by the government's fiscal choices. International bodies like the IMF and World Bank also closely monitor India’s fiscal health, influencing global investor sentiment.

**Significance for India: Sustaining Growth and Enhancing Resilience**

These recommendations hold profound significance for India. Prioritizing fiscal discipline is crucial for maintaining macroeconomic stability. High fiscal deficits and public debt can lead to inflation, higher interest rates, and crowding out of private investment. India has a history of fiscal consolidation efforts, notably the **Fiscal Responsibility and Budget Management (FRBM) Act, 2003**, which aimed to institutionalize financial discipline. CII's call for debt sustainability aligns directly with the spirit of the FRBM Act, which mandates targets for fiscal deficit and public debt. Institutional reforms are vital for improving the ease of doing business, enhancing governance, and attracting both domestic and foreign investment. Measures like the **Goods and Services Tax (GST)**, introduced through the 101st Constitutional Amendment Act, 2016, were monumental institutional reforms aimed at simplifying the indirect tax structure and improving tax compliance. Further reforms are needed to streamline regulatory processes, strengthen contract enforcement, and improve judicial efficiency. Enhanced revenue mobilization through a higher tax-to-GDP ratio is essential for funding critical infrastructure projects, social welfare schemes, and defense spending, all while ensuring a sustainable fiscal path. Strategic disinvestment not only generates non-debt capital receipts but also promotes market efficiency and reduces government intervention in commercial activities, thereby fostering a more competitive environment.

**Future Implications: A Path to Developed Status**

If the government effectively implements these recommendations, India stands to gain significantly. A strong fiscal position will bolster investor confidence, leading to increased capital inflows and job creation. It will also provide the government with the necessary fiscal space to respond to future economic shocks and invest in long-term growth drivers like education, healthcare, and green technologies. Adherence to fiscal prudence and continuation of structural reforms are critical for India to achieve its ambitious goal of becoming a developed economy. This would entail not just higher GDP numbers but also improved quality of life, better public services, and a more equitable society. The future implications extend to India's global standing, as a fiscally responsible and rapidly growing economy would further cement its position as a key player in the international arena, influencing global economic policies and trade dynamics. However, the challenge lies in balancing fiscal consolidation with the need for growth-inducing public expenditure, especially in a developing economy with significant developmental needs.