Finance Minister Nirmala – Amid a volatile global economic environment buffeted by the US trade war, tweaking current policies to boost domestic manufacturing — with special focus on small and medium businesses and the flagship Production-Linked Incentive (PLI) scheme — were among the key suggestions made by economists at the first pre-Budget meeting chaired by Finance Minister Nirmala Sitharaman on Monday, ahead of the presentation of the Union Budget for 2026-27 in February. In the meeting, which was attended by 19 leading economists and academicians, the government’s capital expenditure on infrastructure and other heads was taken note of. However, economists suggested scaling up investment in digital infrastructure and research and development, a person aware of the deliberations said on condition of anonymity.

“It was mentioned in the discussion that the government’s continued focus on fiscal consolidation, growth and inflation gives it leverage for the Budget, though it need not sacrifice Budget discipline,” the source told The Indian Express. “It was expressed that there is an underlying need for a manufacturing policy which can take care of the MSME sector, employment, technology upgradation, and reduce import dependence. ” Story continues below this ad The meeting was also attended by senior Finance Ministry officials including Economic Affairs Secretary Anuradha Thakur and Chief Economic Advisor V Anantha Nageswaran.

Later in the day, Sitharaman and Finance Ministry officials held a second pre-Budget meeting with representatives from farmer associations and agriculture economists. At the first meeting, while economists discussed the support given to consumption by the reduction in personal Income Tax and Goods and Services Tax (GST) rates, they suggested more measures on the indirect tax front, including steps to substitute imports and streamlining of Customs processes.

A greater focus on research and development in green technology and renewable energy was also recommended, another source said. On the expenditure front, although the pace of the Centre’s capex growth has slowed, there has been internal acknowledgement of the positive multiplier effect of the continuous focus on public sector investment, which the economists also emphasised in Monday’s meeting.

At the same time, they favoured continuing the fiscal discipline while maintaining the share of capital expenditure in the Budget. “The problem with debt-to-GDP is that the central government has been keeping it under control; it’s the Centre plus states which is a problem.

During the discussion, the issue of Centre plus states’ debt-to-GDP ratio was highlighted by a participant. That is obviously a concern and we need to work on that. But this is a Budget for the central government and this (states’ finances) is an issue to be dealt with by the Finance Commission,” the source said.

Starting 2026-27, the Centre will begin targeting its debt-to-GDP ratio instead of the annual fiscal deficit, which is expected to come down to 4. 4 per cent of GDP this year. As per the 2025-26 Budget documents, the Centre is aiming to lower its debt-to-GDP ratio to 49-51 per cent by March 2031 from 57.

1 per cent in 2024-25. The discussions on next year’s Budget come amid concerns about the ramifications of the US trade war for domestic exporters, especially Micro, Small and Medium Enterprises (MSMEs).

Goods from India, which was one of the first countries to enter into trade negotiations with the US earlier this year, have been facing a cumulative tariff of 50 per cent upon entry into the world’s largest economy since late August. Story continues below this ad Despite external headwinds, India’s GDP growth has been on the up recently — it rose for the third quarter in a row in April-June to an unexpectedly high 7.

8 per cent. As such, while economists in recent months have upgraded India’s growth forecast for the current year closer to 7 per cent, the impact of the US tariffs could be adverse next year if a trade deal is not finalised in the near future.

Last month, the International Monetary Fund (IMF) lowered its GDP growth forecast for India for 2026-27 by 20 basis points (bps) to 6. 2 per cent, days after the World Bank had announced a similar reduction.

But, like the World Bank, the IMF also raised its forecast for the current fiscal by 20 bps. The IMF now sees India’s GDP growing 6.

6 per cent in 2025-26. The Reserve Bank of India has forecast growth for 2025-26 at 6.

8 per cent.