The Centre has spent 28 per cent of its FY27 capital expenditure budget of Rs 12.21 trillion in the first three months against around 24.5 per cent during the corresponding period a year ago.
Private corporations in India invested approximately 30.3 trillion in fixed assets during FY25, marking a 7 per cent increase from the previous year, according to the statistics ministry. This growth in private capital expenditure contrasts with a slowdown in government capital spending.
Rural commercial vehicle (CV) registrations have consistently outpaced urban sales from April to July 2026, driven by a significant diversification of the rural economy and the positive impact of GST-led consumption, according to experts and data from Fada.
Despite large inflows of foreign funds mobilised through the Reserve Bank of India's (RBI's) concessional swap schemes, the rupee has seen little impact because the dollars have largely been absorbed into the central bank's reserves instead of being released into the spot market, according to market participants.
Inflows into non-resident Indian (NRI) deposit schemes decreased by 23.24 per cent to $2.78 billion during the first quarter of FY27, down from $3.61 billion in the previous year, according to Reserve Bank of India (RBI) data.
The government maintained a strong pace of capital expenditure, which jumped nearly 24 per cent to Rs 3.40 trillion in April-June.
India's balance of payments (BoP) recorded an $8.1 billion deficit in the first quarter of 2026-27 (Q1FY27), a significant increase from a $4.5 billion surplus in the corresponding period of the previous year, primarily driven by a sharp reversal in portfolio flows.
The Reserve Bank of India (RBI) has prematurely closed its swap facility for foreign currency non-resident (bank) deposits, FCNR(B), one month ahead of schedule, after banks mobilised $52.3 billion under the scheme by August 13, indicating sufficient foreign currency reserves.
India's banking system liquidity has fallen to its lowest level in over three weeks, driven by robust credit growth and potential RBI intervention in the foreign exchange market, according to the latest data from the Reserve Bank of India.
Divestment has emerged as a priority for the government following a moderation in direct tax collections.
Tax collection so far has been encouraging, with net direct tax receipts reaching Rs 5.21 trillion by June 17, nearly a 15 per cent increase compared to the same period last year.
Inflows into foreign currency non-resident (bank), or FCNR (B), deposits have significantly underperformed market expectations, leading to a more than 1 per cent depreciation of the rupee against the dollar this week. Analysts point to fading RBI support measures, tepid interest due to rising global bond yields, and narrowing interest rate spreads compared to 2013 as key challenges.
India's economy in FY26 saw significant momentum from investment demand, with gross fixed capital formation (GFCF) accelerating to 8.2 per cent, while private final consumption expenditure (PFCE) also grew steadily, according to provisional estimates.
'For every 10,000 applicants, even an additional Rs 300 to Rs 700 per candidate for testing, assessment administration and re-screening can mean Rs 30 lakh to Rs 70 lakh extra at the hiring-stage cost before training begins.'
Cash remains dominant for many transactions despite continued expansion in digital payments across the country.
Bank of Baroda economists project India's GDP to grow 6.5-6.8 per cent in FY27 but warn that the fiscal deficit could overshoot the budgeted 4.3 per cent target, potentially reaching 4.7-4.8 per cent of GDP due to subsidy overruns, excise duty cuts, and oil marketing company losses.
India's new manufacturing project announcements more than halved in the fourth quarter of FY26, falling 60 per cent sequentially and 78 per cent year-on-year to approximately 1.7 trillion, driven by global uncertainties, geopolitical conflicts in West Asia, and existing unutilised manufacturing capacity.
The Reserve Bank of India (RBI) Governor Sanjay Malhotra is now confronting the classic growth-inflation tradeoff, a situation exacerbated by the West Asia war, which threatens to end the 'goldilocks period' of low inflation and robust growth.
Revenue collection next financial year may be affected, and, along with this, subsidies on food and fertilisers can go up if the war in West Asia drags for long, according to experts.
Companies are primarily using funds raised through fresh equity issuance to repay existing debt, followed by allocation for capital expenditure, according to a study by Bank of Baroda of over 200 filings with the market regulator between April and October 2025. The report stated that of these filings with the Securities and Exchange Board of India (Sebi) - covering both funds already raised in FY26 and future intent - 189 companies provided clear data on the purpose of the fund-raising.
'The government's decision to keep interest rates unchanged on small savings schemes will certainly constrain banks' ability to cut deposit rates further.'
'The US reciprocal tariff has added another element of uncertainty and the central bank may prefer to wait and get further clarity.'
India, the world's fourth largest economy, is set to maintain the 'goldilocks' phase with tailwinds of good growth, low inflation and robust banking performance as well as reform initiatives poised to sustain the economic pace witnessed during 2025.
'Rate cut looks unlikely and there is reason to believe that the cycle is over.'
The ministries of Road Transport & Highways and Railways have exceeded the national average capital expenditure (capex) by spending 63 per cent and 57 per cent of Budget estimates (BE), respectively, in the first half of 2025-26 (FY26). The total capital expenditure for April-September of FY26 stood at 52 per cent of the BE, according to the latest data by the Controller General of Accounts (CGA).
'A repo cut will be very good for the market as it will mean that everything is being done to spur growth in these uncertain times.'
India's consumer price index (CPI)-based retail inflation rate is likely to have cooled further in June, thus remaining below the 4 per cent target of the Reserve Bank of India (RBI) for a fifth consecutive month, giving the central bank wiggle room to focus on growth. Economists reckon that the decline is on account of easing prices in various categories of goods, especially food items, and a favourable base effect.
The US' move to raise the tariff on most Indian goods to 50 per cent could drag India's GDP growth for FY26 by 35 to 60 basis points, according to various economists. One basis point (bp) is equal to 0.01 per cent.
'As the Budget has taken some measures to spur growth, similar action from the MPC may be expected.'
The RBI is likely to reduce the key interest rate by 25 basis points this week after keeping it on hold for two years, complementing the Union Budget initiatives to push consumption-led demand, though the sliding rupee continues to be a concern. As the retail inflation has remained within the Reserve Bank's comfort zone (less than 6 per cent) for most of the year, the central bank can take rate action to boost growth hit by sluggish consumption, opined experts.
While growth in India is largely domestic and hence the overall GDP effect may not be more than 0.15-0.2%, but overall trade will be impacted due to every country going back to the drawing board, points out Madan Sabnavis.
Companies may foot less of the tax bill for some time yet. The corporate share of net direct tax collections has been lower in 2024-25 than in previous years. The corporate segment accounted for 45.6 per cent of total net direct tax collections as of March 16, compared to 48.1 per cent on the same date in 2023-24 (FY24).
The government may save over Rs 70,000 crore (Rs 700 billion) on capital and revenue expenditure allocated towards new schemes in the FY25 Budget that are yet to be implemented.
Following the lacklustre growth numbers in the second quarter (Q2FY25), economists believe the upcoming Union Budget for 2025-26 should focus on reforms that will stimulate consumption, manufacturing and spur employment. India's growth unexpectedly slowed to 5.4 per cent in the second quarter, due to low capital formation, weak consumption, besides adverse weather impact.
'The RBI's MPC will maintain the current policy rates (6.50%) at the policy meeting, given ongoing inflationary pressures.'
The Real Effective Exchange Rate (REER) of the rupee moderated in December to 107.20 after hitting a peak of 108.14 in November, latest data released by the Reserve Bank of India (RBI) showed. The REER was 103.66 in January 2024. The rupee depreciated around 3 per cent against the dollar in 2024.
In response to the panic triggered by Trump's trade policies, the RBI net sold approximately $43 billion in the second half of FY25 to curb volatility, as the rupee plunged to a low of 87.95 per dollar in February this year.
The government does not seem keen on issuing fresh gold bonds given the overall cost and rising gold prices.
Job creation, improving farm productivity, and mobilising public funds for infrastructure development were some of the issues that figured during the interaction between Prime Minister Narendra Modi and economists ahead of the 2025-26 Union Budget. The prime minister on Tuesday met eminent economists and sectoral experts at NITI Aayog to hear their views and suggestions for the upcoming Budget. Union Finance Minister Nirmala Sitharaman is scheduled to present the Budget for 2025-26 in the Lok Sabha on February 1, 2025.
The upcoming Union Budget to be presented on February 1 is likely to assume a nominal gross domestic product (GDP) growth between 10 and 10.5 per cent for FY26, a Business Standard poll of 10 economists showed. The first advance estimates released by the National Statistics Office (NSO) had estimated a nominal GDP growth of 9.7 per cent for FY25. Nominal GDP, calculated at current market prices, factors in the effect of inflation. It is used as the base to calculate crucial macroeconomic indicators, such as fiscal deficit, revenue deficit, and debt-to-GDP ratio.
