India has been witnessing an impressive gross domestic product (GDP) growth for the past few years, to the extent that it has now become the fourth-largest economy in the world, having recently surpassed Japan. It was ranked seventh just ten years ago. However, no growth is complete unless it is enjoyed by the masses or majority of the population. And therefore, the real question is whether a country’s growth is percolating to the lower-income segment of its population, underserved sectors/ regions, or is confined to just a minuscule top percentage or a few sectors and regions. India ranks 124th in terms of per capita GDP (as per IMF estimation), which is one of the lowest in the world ($3,051 in 2026 (projected); $2,818 in 2025; $2,695 in 2024). More so, this ranking hasn’t changed much in the past five Years, remaining between 125th and 130th. And a disproportionately high percentage of GDP (around 58%) is enjoyed by merely top 10% of the population, while bottom 50% of population receives only 15% of the GDP. Further, in terms of the progress towards the 17 Sustainable Development Goal (SDGs) defined by the United Nations for inclusive and sustainable growth of a country, we rank at a mere 99th out of 167 countries in the world on the 2025 SDG Index (with a score of 67 out of 100).
While there could be several facets to this issue and its resolution, the budget, being the country’s fiscal policy instrument, needs to gear itself in this direction and aim towards that. Both the fund investment strategy and the fund-raising strategy of the budget could incorporate this agenda more consciously.
On the investment side, while the government has been coming up with several welfare plans and capital expenditure plans to spearhead employment generation/ income levels for the underserved segments, we need to be able to review and see if commensurate gains have been achieved in these segments/ sectors/ regions. We also need to if we have been able to cover all the needy sectors or have some critical ones been left behind, especially keeping in view the 17 SDGs and the imperative need of the country to progress faster towards their achievement.
For instance, a review of data from the past five years suggests that we have successfully covered physical infrastructure (capital expenditure more than doubled since the financial year 2020), rural safety nets, and women's welfare dimensions (gender budget rose to approx. 9%). However, there are some critical areas/ SDGs that may need more attention of the policymakers like the following:
- Gig and platform workers--projected to be approx. 2.3 crore by 2030 and earning unstable and low incomes (around ₹15,000– ₹25,000 per month).
- Job quality--young population and women who are employed in low-productive work. This results in high employment but low-income growth
- Developing human capital beyond schooling--poor alignment with industry demand in terms of skill set and ignored mental health.
- SDG2 on hunger (limited spending on nutrition quality), SDG 5 on gender equality (gender budget exists but with low outcome-based spending), SDG 6 on clean water and sanitation (water quality and groundwater level restoration is under-funded), SDG 13 on climate action (adaptation spending is low), SDG 16 on Institutions, justice and governance (low allocation for judiciary and legal aid).
For instance, a review of data from the past five years suggests that we have successfully covered physical infrastructure (capital expenditure more than doubled since the financial year 2020), rural safety nets, and women's welfare dimensions (gender budget rose to approx. 9%). However, there are some critical areas/ SDGs that may need more attention of the policymakers like the following:
- Gig and platform workers--projected to be approx. 2.3 crore by 2030 and earning unstable and low incomes (around ₹15,000– ₹25,000 per month).
- Job quality--young population and women who are employed in low-productive work. This results in high employment but low-income growth
- Developing human capital beyond schooling--poor alignment with industry demand in terms of skill set and ignored mental health.
- SDG2 on hunger (limited spending on nutrition quality), SDG 5 on gender equality (gender budget exists but with low outcome-based spending), SDG 6 on clean water and sanitation (water quality and groundwater level restoration is under-funded), SDG 13 on climate action (adaptation spending is low), SDG 16 on Institutions, justice and governance (low allocation for judiciary and legal aid).
Thus, a thorough analysis is required to identify the gaps and lags in the process and thereby make course corrections in Budget 2026.
Likewise, on the fund-raising side of the budget, tax on incomes of individuals and non-corporate entities makes up a significant portion of revenue receipts, even more than tax generated from corporates. Further, these individuals end up bearing tax burden on both ends of earning income (direct tax) as well as on its spending (indirect tax). In a country like India, where the majority of the population (approx. 80%-85%) belongs to middle and lower-income classes, this puts higher pressure on their financial well-being. Understandably, the corporate sector needs to be incentivised to enhance production levels in the economy, but the incomes, savings and spending levels of individuals are also critical drivers for the economy’s growth engine. Welfare of the two entities must be balanced well to ensure growth along with reduced disparities in the country. The recent income tax and GST amendments have tried to ease the tax pressure on individual incomes and consumption, but its parity vis-à-vis the corporate sector is still a far cry. The budget needs to be able to correct such anomalies.
Another facet that the budget must be cognizant of, in order to ensure inclusive growth, is the balanced geographical development of the country. If we see the ranking order of states in India in terms of per capita GDP, it hasn’t changed much over the years. Telangana, Karnataka, Haryana, Tamil Nadu, Gujarat remain at the top in the list while UP, Bihar and the northeastern states remain low in per capita ranking, thus implying that the poorer states haven’t been able to climb up the ladder significantly in all these years. This area, therefore, needs a thorough review to see what else could be done via better budget allocations.
In addition, India is fortunate to be in a period where we are enjoying a high demographic dividend. A high percentage of the population (around 66%) is in the productive age group of 15 to 59 years. It is expected to continue to rise and peak around the early to mid-2030s. Can the budget also target consciously to harness this dividend by creating better & more remunerative and productive employment opportunities for this segment? This will create a win-win situation of higher contribution to GDP for the government as well as higher income levels for this set of the population, enabling more even growth. Thus, the budget could consciously target to raise more GDP via this segment rather than from the corporate or traditional income generating segments alone.
Finally, the nature and pace of changes in the recent past have been very rapid and drastic, especially considering the geopolitical shifts/ relationships, trade environment/ uncertainties, social trends/ behaviour, generational mindsets, advent of technology and so on. This requires a serious exercise of assessing potential risks impacting the budget and risk mitigation strategies. Without this, effective execution of the budget 2026 and meeting its desired outcomes could pose a serious challenge. The budget must, therefore, be also accompanied by a carefully drawn risk management strategy.
In sum, we have so far done fairly well in terms of the quantity of growth. It is now an urgent need of the current dynamic times to also think of innovative and practical ways to improve the quality of this growth, making it more inclusive, balanced and in line with the SDGs.
Can the Budget of 2026 take a lead in incorporating these growth priorities and steer the economy’s wheels in this direction?
This article is authored by Neetika Batra, chair & professor and Vani Aggarwal, senior assistant professor, finance, SOIL Institute of Management.