Budget 2026: What Experts Say on RBI Rate Cuts, Growth Roadmap and Govt Spending

As the Union Budget 2026 approaches, policymakers find themselves navigating a delicate balance between stimulating economic growth and maintaining fiscal discipline. While there is rising pressure to increase government spending to revive consumer demand, economists and market analysts stress that safeguarding fiscal stability will be just as crucial to ensure sustained monetary easing and healthy credit growth.

Market expert Sunil Subramaniam believes the upcoming Budget will stay aligned with the Reserve Bank of India’s (RBI) monetary objectives. He expects the government to remain cautious on fiscal consolidation, keeping both the fiscal deficit and overall borrowing in check, while strategically channeling available resources toward capital investment and initiatives that encourage consumption.

Sharing a similar outlook, Harshal Dasani of INVasset PMS said that a responsible fiscal approach could allow the RBI to accelerate interest rate cuts. According to him, a Budget anchored in credibility and driven by productive capital expenditure would create a supportive environment for faster monetary easing.

“A credible fiscal roadmap that avoids inflationary pressure and keeps government borrowing manageable strengthens confidence in the bond market. This enables the central bank to pursue growth-friendly policies without creating financial instability,” Dasani explained. He added that with the RBI already reducing the repo rate to 5.25 percent following the December 2025 policy cut, there remains scope for further easing—provided fiscal prudence is maintained.

India Better Positioned for Rate Cuts Than Global Peers

Globally, central banks are adopting a cautious stance toward monetary easing. The US Federal Reserve is widely expected to maintain interest rates between 3.50 and 3.75 percent in the near term, while policymakers in the UK continue deliberating on the timing of future reductions. In comparison, analysts believe India is better placed to pursue additional rate cuts, though the government’s fiscal strategy in Budget 2026 will play a decisive role.

Brokerage firms echo this sentiment. IIFL Capital estimates that the RBI could lower policy rates by another 50 basis points in 2026. The brokerage pointed out that the current gap between the repo rate and core inflation stands at 2.8 percentage points, significantly higher than the long-term average of 1.1 percentage points. This margin, it said, provides adequate room for further policy easing.

Meanwhile, Goldman Sachs noted that if global trade challenges continue beyond the first quarter of FY27 and begin to significantly impact economic growth, the RBI could utilize its remaining policy space to offer additional stimulus.

Overall, economists agree that Budget 2026 will be closely watched for its fiscal stance, as its ability to balance growth ambitions with financial stability could determine the pace and depth of future interest rate cuts in India.

Also read: Maharashtra Declares State Holiday, 3 Days Mourning After Ajit Pawar Death