Budget 2026-27: CII suggests reforms to drive investment-led growth

Industry lobby Confederation of Indian Industry  CII has proposed a comprehensive set of reforms for the forthcoming Union Budget 2026-27 to drive sustained investment growth spanning public, private, and foreign investments and maintain India's momentum as one of the world’s fastest-growing major economies.

The Confederation of Indian Industry (CII) suggested increasing central capital expenditure by 12 per cent and capex support to states by 10 per cent in FY27; launching a `150 lakh crore National Infrastructure Pipeline (NIP) 2.0 for 2026-32; offering incremental tax credits or compliance relaxations for firms achieving significant new investment, production, or tax contribution milestones; and establishing an NRI Investment Promotion Fund.

It also called for reinstating accelerated depreciation benefits to further incentivise fresh capital expenditure and technology upgrades, particularly for MSMEs and manufacturing industries, provided the measure is structured to stimulate modernisation without triggering Minimum Alternate Tax (MAT) obligations. Besides, CII urged for strengthening the National Investment and Infrastructure Fund (NIIF) by forming a Sovereign Investment Strategy Council (SIFC) to align investments with national priorities.

The Union Budget for the 2026-27 fiscal year is expected to be presented on February 1. According to CII, reinforcing fiscal stability through an economic-cycle-based public debt framework, in place of inflexible annual deficit rules, would also enhance resilience by allowing counter-cyclical flexibility during global shocks and avoiding repeated breaches of yearly targets.

Such a framework would strengthen credibility by aligning fiscal policy with medium-term debt sustainability, it said. "The forthcoming Union Budget 2026-27 has to serve the dual role of stabiliser and growth enabler, and promoting investments will be one of the most critical components in this regard,” CII Director General Chandrajit Banerjee said. Towards this objective, CII has proposed a comprehensive investment strategy anchored in fiscal prudence, capital efficiency, and investor confidence.

The recommendations emphasise strengthening public capital expenditure as the backbone of infrastructure-led growth, while simultaneously unlocking private and foreign investment through targeted incentives, institutional reforms, and enhanced global engagement. Bolstering public investment remains essential, CII said, observing that public capital expenditure has been the key driver of India’s post-pandemic recovery, catalysing infrastructure expansion and crowding in private capital.

To strengthen project selection and execution, CII has proposed institutionalising a Capital Expenditure Efficiency Framework (CEEF) to prioritise high-impact projects, track physical and financial progress and evaluate outcomes based on productivity and regional spillovers. Second, facilitating private investment will be the next major priority.

While public investment lays the foundation, private and foreign capital will be the true accelerators of India’s transformation.  “The Government of India has provided a big demand push via income tax relief in last year’s Union Budget and recently via GST 2.0. Investments, especially private sector investment, will be the next big driver for economic growth that needs to be focused on in the next fiscal to continue the growth momentum,” added Banerjee.

In this context, incremental tax credits or compliance relaxations for firms achieving significant new investment, production, or tax contribution milestones will encourage reinvestment of profits into productive assets and the scaling of capacity in high-growth sectors such as clean energy, electronics, semiconductors and logistics, CII said.

It suggested creating an NRI Investment Promotion Fund, which can be a government-private holding company, with up to 49 per cent government stake, that channels NRI, FPI and institutional investments into sectors such as infrastructure and AI. nThe fund can raise capital through long-term convertible bonds benchmarked to FCNR rates, offering secure returns with equity upside, including special India Global Diaspora Bonds, the industry lobby said.

It also called for simplifying ECB (external commercial borrowings) processes and providing higher borrowing limits, longer tenures and partial risk cover for infrastructure and manufacturing projects would improve access to global capital while maintaining external sustainability. A single-window clearance mechanism for large FDI proposals, backed by dedicated facilitation cells at the Centre and in states, with deemed approval within 60-90 days, would deliver predictability, reduce administrative delays and accelerate big-ticket investments, said CII.

To deepen global investor engagement, it recommended establishing an India Global Economic Forum as a government-led platform that brings together MNCs, sovereign wealth funds, pension funds, private equity and other institutional investors for structured dialogue with senior government leadership on emerging investment opportunities across sectors. “An investment-driven growth strategy, anchored in fiscal credibility and institutional reforms, will define India’s next development phase,” Banerjee added.