Expect Private Investment Cycle To Pick Up, says Sanjeev Krishnan Chairperson, PwC in India

The finance minister’s approach to the Union Budget 2025-26 embodies the well-known adage ‘When the going gets tough, the tough get going.’ Since the onset of Covid-19, the government adopted the Keynesian approach of pump-priming the economy through high capital expenditure in successive Budgets. While this strategy stimulated growth for three fiscals, the incremental returns on these investments began to taper off in FY25, largely due to lower investments from the private sector and a consumption slowdown resulting from stagnating wage growth coupled with inflation.

Grappling with this reducing growth rate over the last seven quarters, the government’s budgetary strategy focusses on modification and moderation, striking a fine balance between the long term and the short term. It seeks to address the demand side of the GDP equation, putting more money in the hands of citizens while prudently managing capital expenditure (capex). The government has provided Indian taxpayers with Rs 1 lakh crore through income tax cuts while maintaining its capex at 3.1% of GDP in FY26. With revenues from income tax exceeding budgeted estimates for four consecutive years, this shift was well-deserved by the average Indian taxpayer.

The Budget has also created multiple policy and monetary enablers to boost the private capex cycle- focussing on enablement, innovation and deregulation. This should not only drive investments in the domestic market but also increase India’s standing as a preferred destination for goods and services.

The government has also adopted a ‘modify and moderate’ strategy towards the manufacturing sector. Acknowledging the contributions of local entrepreneurs, MSMEs, and start-ups, this Budget shifts the focus to incentivise productivity, quality, and competitiveness while boosting employment. Policy-level support, if implemented swiftly and in consultation with the industry, can catapult the sector into the next phase of growth.

As the world demands a complete reinvention of the existing global value chain, the Budget announcements laid emphasis on India’s fourth engine-exports. The government has announced the Export Promotion Mission, support for global supply chain integration, and Bharat Trade Net-an addition to India’s Digital Public Infrastructure that will complement the Unified Logistics Interface Platform. However, these must avoid existing roadblocks, including the India Trade Promotion Organisation (ITPO) and Export Promotion Councils which have been criticised for inefficiency, lack of transparency and absence of data-driven outward strategies. In addition to assisting the private sector in project planning, access to data and maps from the Gati Shakti portal creates opportunities to disrupt and modernise the Indian logistics space.

Another welcome feature is the holistic approach in strategically securing the nation. Instead of focussing solely on industrialisation to ensure long-term economic security, it also considers food, health, technology and skills security as critical dimensions. Building on the initiatives announced in the previous Budget, this year’s Budget promises to build five National Centres of Excellence to equip the youth with the skills required to ‘Make in India’.

The Budget has also announced a Deep Tech Fund of Funds and has allocated Rs 500 crore to set up a Centre of Excellence in Artificial Intelligence. The proposed national framework to promote Global Capability Centres in emerging Tier II cities will also go a long way towards deepening skill development beyond Indian metros. Contributions from the private sector and global players will be imperative.

The government also announced an Rs 20,000 crore fund for private sector driven R&D and innovation-a big step towards creating enablement and skilling support. Additionally, the gene bank, high-yield seeds, creative urban planning and even research scholarships reiterate the strong push for innovation.

Over the years, India’s limitations in terms of ease of doing business (EoDB) have been highlighted by domestic and international players-and it is heartening to see the Budget highlighting reforms to address this challenge. However, the newly proposed High-Level Committee for Regulatory Reforms has its task cut out-beyond reviewing regulations, certifications, licences and permissions, it must establish effective change management mechanisms for regulators, businesses and citizens to ensure that this focus on EoDB and trust-based governance translates from policy to practice.

The 2025-26 Budget demonstrates the government’s willingness to make strategic investments from a position of fiscal strength, which has been achieved despite challenges. With supportive reforms and expectations of an easing monetary policy, we could expect the private investment cycle to pick up. Leveraging the impetus from this Budget, businesses must foster innovation and build capacity, positioning themselves and the nation as a formidable and stable economic centre on the world stage. 

Views are personal. The author is Sanjeev Krishan, Chairperson, PwC in India