Budget 2026 Expectations: Microfinance Sector Seeks Stronger KYC, Responsible Credit Reporting

Rising living costs, higher housing expenses, and taxes on investment returns have now fuelled fresh calls for relief on the income-tax front. Experts have urged the government to revisit home loan benefits, revise the standard deduction, and introduce changes to provisions under the Income Tax Act, 1961—particularly Section 80C—as well as the rebate under Section 87A.

However, with the proposed Income-tax Act, 2025 already introduced, some industry experts expect limited substantive changes on the direct tax front in the upcoming Budget.

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"Greater focus on distributed solar applications, energy storage, and last-mile infrastructure will be key to improving grid resilience, reducing transmission losses, and ensuring reliable power access, especially in rural and high-demand regions," Vivek Gupta, managing director, Oswal Pumps, said.

He further added that policy incentives that support domestic manufacturing, indigenous innovation, and affordable green financing can significantly accelerate adoption while reducing import dependence.

A forward-looking Budget with clear regulatory frameworks and targeted financial support can enable these solutions to scale sustainably, strengthening India’s energy security and advancing inclusive, low-carbon growth, Gupta added.

"Building India’s AI capacity will depend on new investments and incentives," Jaspreet Bindra, co-founder, AI & Beyond, said.

Industry urges for long-term fiscal support to expand data centers and cloud infrastructure to meet the rising demand of the AI segment. Sanctioning a second phase of the IndiaAI Mission with increased grants for infrastructure, will address sector-specific AI challenges.

Bindra also recommends for a national Compute Credit program, to subsidize cloud/GPU hours on India-based platforms. Further, expanding R&D spending by extending tax credits or direct grants for AI research is also keenly watched out for in the Budget.

Additionally, extending the Production Linked Incentive scheme to new technology segments could drive innovation and attract investments, Bindra added.

"The budget should aim to strengthen India’s healthcare system in a more inclusive and secure manner. With rising healthcare demands across urban and rural India, it will be essential to take a decisive step by ensuring accessible healthcare for all," Reny Varghese, chief operating officer, Zynova Shalby Hospital Mumbai, said.

The key demands call for a higher budgetary allocation to strengthen rural healthcare by improving access, infrastructure, and availability of trained medical professionals. The budget should also actively involve experienced private-sector healthcare professionals in policy formulation to bring practical insights and operational efficiency, Varghese said.

Additionally, there is a strong push for dedicated funding to protect medical professionals from workplace violence, ensuring their safety, dignity, and ability to deliver timely, consistent, patient-centric care, with public health and the healthcare workforce treated as central priorities.

"As India prepares for the upcoming Union Budget, we hope to see continued recognition of education as a core driver of long-term economic growth and the Viksit Bharat vision. Building workforce readiness through outcome-led skilling, industry-aligned learning, and practical capabilities will be crucial as India’s young and working population navigates an increasingly competitive, skills-driven job market," Dr Sanjay Salunkhe, founder, Jaro Education, said.

The education sector calls for targeted support for digital and online education, which can significantly widen access to high-quality higher and executive education for working professionals across geographies. Building a robust higher education ecosystem will be vital to creating future-ready talent at scale.

There is also a need for policies that promote closer collaboration between academia, industry, and education providers, allowing learners to translate academic knowledge into real-world business and workplace applications.

Prakash Ravindran, CEO & Director of InstiFi, said the Union Budget will be crucial in reinforcing India’s rapidly expanding digital payments ecosystem through stronger infrastructure, cybersecurity and regulatory clarity.

He noted that policy support easing compliance for MSMEs and encouraging fintech innovation would help payment aggregators scale responsibly while maintaining trust.

“Continued focus on cybersecurity, data protection and ease of doing business will strengthen the overall payments landscape,” he added.

Dr. G. Anil Krishna, Chairman & Managing Director of Medicover Hospitals (India), said that healthcare should remain a central focus in the upcoming Union Budget, stressing the need for stronger hospital infrastructure, emergency response systems, and advanced diagnostic facilities to manage rising lifestyle and chronic diseases. He also underscored the importance of preventive care, early screening and affordability to improve outcomes nationwide.

“A healthcare-focused budget will empower hospitals to continue delivering comprehensive, patient-centric care and improve health outcomes for communities across the country,” he added.

Padmanand V, Partner and Agriculture Industry Leader, Grant Thornton Bharat, highlighted that while a large portion of India’s agri-budget is spent on DBT, MSP and input subsidies, investment in farm mechanisation and infrastructure remains limited.

“It is the investment multiplier, given the Incremental Capital Output Ratio (ICOR) that will lead to sustained and rapid growth of the agri sector,” he said.

He added that the upcoming budget should prioritise direct infrastructure investment and subsidies to boost long-term agricultural growth.

Keyur Shah, Chairman & Managing Director, Yash Highvoltage Limited, said, “The Indian power sector delivered a record performance in 2025 by meeting peak demand, expanding capacity and sharply reducing shortages.”

He added that the upcoming Union Budget should sustain this momentum with continued capital expenditure while supporting infrastructure-led growth.

He believes that focus on renewables, smart grids, energy storage, green hydrogen, PLI incentives for niche power equipment manufacturers and a rationalised tax framework will strengthen domestic competitiveness and future-proof the sector.

Kami Viswanthan, President, MEISA, FedEx, said, “In a rapidly evolving global trade environment, supply chains are increasingly being designed around speed, certainty and trust.”

He added that India’s global competitiveness depends on seamless cargo movement across borders and transport modes. The upcoming Union Budget can reinforce this by investing in dedicated air cargo infrastructure, streamlining digital customs and ensuring time-bound clearance processes to strengthen trade efficiency and logistics resilience.

"We appreciate the Government of India’s constructive steps toward GST/Cess simplification and rationalisation. Continued emphasis on infrastructure development—particularly roads and high-speed charging infrastructure—along with rationalisation of taxes/duties, a stable long-term policy framework, and steady foreign exchange conditions will be instrumental in accelerating growth in the luxury car industry. We remain optimistic that the forthcoming budget will serve as a catalyst for boosting overall consumption, including in the luxury automobile segment," said Balbir Singh Dhillon, Brand Director, Audi India.

“India’s formal recycling ecosystem remains constrained by a policy framework that has not kept pace with sustainability goals. High GST on plastic waste, scrap, recycling machinery, and inputs continues to make compliant recycling financially uncompetitive. The Union Budget must prioritise zero-rating GST on plastic waste, scrap, and recycling equipment, along with a meaningful reduction in GST on recycled plastic granules, to incentivise their use in long-life and durable products. Without correcting these cost distortions, the transition from virgin to recycled plastics will remain limited," said Sushil Kumar Aggarwal, Chairman and Whole-Time Director of AVRO India Limited and National President of The All-India Plastics Molded Furniture Manufacturers Association (AIPMFMA).

"We expect continued emphasis on industrial corridors, enhanced connectivity, and further ease-of-doing-business reforms to attract global investments and integrate Indian industry deeper into global supply chains. Rationalization of GST slabs, especially incentives for sustainable packaging and eco-friendly packaging, will not only reduce costs for the beverage industry but also accelerate our transition toward a circular economy. Targeted measures to boost rural incomes and consumption will unleash enormous demand potential across tier-2, tier-3 cities and rural markets, the real growth engine of tomorrow," Paritosh Ladhani - Joint Managing Director of both SLMG Beverages and Sincere Developers.

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 “For Budget 2026, we expect a decisive policy push toward GST rationalization on travel products made of man-made fibers & polymers and reforms that bolster domestic manufacturing. Strengthening MSME supply chains and incentivizing "Made in India" production will be critical to meeting domestic demand while unlocking our massive export potential. Furthermore, the industry seeks frameworks that encourage eco-friendly materials, circular economy practices, and sustainable packaging to align with global consumer shifts,” said Tushar Kamath, Chief Financial Officer, uppercase.

The Indian stock market will remain open on February 1, 2026, Sunday for the Union Budget 2026 presentation. Both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have announced that trading will run at normal hours, letting investors react right away to the finance minister’s announcements.

Markets are normally closed on Sundays, making this a rare event. The move shows how important the budget is, as it can influence businesses, investors, market trends. Traders will be closely watching every update.

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 “One of the key expectations is a move toward a more balanced, alcohol-content-based tax structure, which would help address pricing distortions across states and improve transparency for both consumers and manufacturers. The industry is also seeking simplification of customs duties on imported raw materials and brewing inputs, along with clearer import–export guidelines to support premiumisation and global competitiveness. Streamlined procedures and reduced compliance complexity would significantly improve ease of doing business, encourage responsible consumption, and enable Indian spirits brands to scale more efficiently," said Prasann Kedia, Managing Director at Associated Alcohols & Breweries Ltd.

“As we look toward the upcoming Budget, the expectation is for deeper support through simpler compliance, clearer tax frameworks, enabling dual listings and creating stronger incentives for domestic capital to participate at the earliest stages. These steps can help convert today’s policy intent into durable, long-term outcomes. India has laid a strong foundation. With continued, thoughtful reforms, we have the opportunity to become one of the most resilient and inclusive startup ecosystems globally," said Archana Jahagirdar, Founder & Managing Partner of Rukam Capital.

“Access to affordable compute has become foundational for AI startups, with GPUs and high-performance infrastructure now as critical as capital. Alongside this, predictable data-governance and DPDP compliance pathways, coupled with simplified government procurement for AI solutions, can significantly accelerate adoption. From a macroeconomic perspective, AI investment is no longer discretionary, it is central to productivity, competitiveness, and long-term growth,” said Ashutosh Upadhyay, Founder & Chief AI Architect, Cognio Labs.

“That women’s work is necessary for economic growth is no longer a subject for debate, and while women are entering the workforce in growing numbers, their share in formal employment has remained stagnant at about 18% for 5 consecutive years, and retention through life transitions continues to be a major challenge," said Pooja Sharma Goyal, Founding CEO, Udaiti.

According to Goyal, the Budget can boost women’s workforce participation through three key shifts: investing in enabling infrastructure like safe mobility, housing near job clusters, and care systems to reduce drop-offs; supporting demand-aligned, job-linked skilling and retention-friendly workplaces; and making gender-disaggregated data a core part of economic planning to track and improve progress effectively.

"MSME retail and artisan-led enterprises need to be treated as economic infrastructure with faster GST refunds, easier access to working capital and clear incentives to scale in Tier-2 and 3 markets. Self reliance will come from building full value chains spanning design, branding and retail along with manufacturing capabilities in India. This Budget can play a catalytic role by aligning finance, skilling, export infrastructure and stable policy to attract long term private capital into the consumer and cultural sectors of India. If backed correctly, Indian brands and design-led enterprises can emerge as a durable growth engine and help insulate domestic consumption from global volatility," said Darshan Dudhoria, CEO, Indian Silk House Agencies.

 “In light of SC judgement restricting Aadhar use, the issue needs to be addressed through solutions such as Aadhaar last-four-digit storage or tokenisation. The other area requiring policy support is availability of stable funding mechanism. High dependence of NBFC-MFIs on bank funding leads to sudden drying up of funds and affects financial inclusion, like seen for last one year. This has resulted in nearly 50 lakh clients going out of formal finance fold. Other than that, at a macro level, the sector has shown tangible improvement in credit discipline, with Portfolio at Risk (1–90 days) for RBI regulated entities declining from 5.3% in Dec 2024 to 2.4% by end December 2025 and nearly 96% of borrowers are within prescribed MFIN guardrails," said Dr Alok Misra, CEO & Director, Microfinance Industry Network (MFIN).

"Budget 2026 should prioritise preventive screening programmes, subsidised diagnostics, and patient navigation systems that enable timely action. Expanding access beyond Tier I cities through diagnostics, oncology services, tele-health, and workforce development is equally important. Rationalising tax and regulatory structures for diagnostics and medical devices would further improve affordability and innovation," said Nivedita Basu, Founder & Chief Vision Officer, Global Cancer Care.

 "Extending tax benefits beyond life and health insurance and ensuring parity across tax regimes can meaningfully improve adoption of business covers, especially among MSMEs that remain underinsured despite rising exposure. Rapid digitalisation is also creating new risks, including cyber incidents and AI-led operational failures. Policy encouragement for digital risk covers is therefore essential. Targeted measures to improve insurance access for rural and women-led enterprises can further strengthen economic resilience," Tejas Jain, CEO and Founder of BimaKavach.

“India’s renewable transition must move beyond simply adding generation capacity to strengthening grid readiness and resilience,” said N Venu, MD & CEO–India & South Asia, Hitachi Energy.

He said achieving the 500 GW non-fossil target by 2030 will depend on a future-ready transmission backbone, with HVDC technology, grid-scale energy storage and digitalisation playing a critical role in managing intermittency and moving clean power efficiently across long distances, supported by clear, execution-focused policy certainty.

“Given rising climate risks and global finance volatility, India cannot rely solely on external funds. This budget must prioritise rapidly scaling adaptation finance to support vulnerable communities and invest in urban resilience,” said Santosh Singh, MD & Partner, Climate and Energy, Intellecap.

He added that strengthening institutions like NABARD and SIDBI is crucial to channel funds effectively across agriculture, water, housing, and infrastructure.

“The GST cut on nutraceuticals from 18% to 5% improves affordability and access, boosting preventive healthcare,” said Avinash Deshmukh, COO of iThrive.

He added that exempting nutritional consulting services from GST and raising the GST registration threshold for startups to ₹1 crore would further strengthen India’s healthcare ecosystem and support early-stage businesses by reducing compliance burdens.

WTicabs Founder Ashok Vashisht urges the government to focus on GST harmonization for transport vehicles, low-cost capital for MSME fleet owners, and a robust scrappage policy to modernize India’s transport sector.

He said, “As India gets ready to present its Union Budget, we eagerly look forward to sustained support for making its mobility ecosystem infrastructurally superior, digitally integrated, and modernized in its transport fleets. Today, the mobility sector reaches a crucial juncture of India’s economic development, urbanization, and sustainability, and it is well placed to propel it forward by making optimum utilization of the upcoming Union Budget.”

Facilitating compliance and minimizing state-specific taxes and making the ease of doing business better in the transport segment will be highly essential. Access to relatively cheap capital, particularly in the case of MSME transport fleet owners and first-time entrepreneurs, can make a world of difference in the development of organized sectors and can ensure better services. Technology adoption such as telematics, AI-based fleet management, and digital freight marketplaces can make the operations even more efficient and reliable.

Emphasis on modernization of the existing fleets through scrappage policies, GST harmonization related to transport vehicles, and finance support will enable the replacement of old fleets with newer, more environment- as well as fuel-efficient options. Alongside, it is also crucial that continuity in policies related to electric mobility, alternative mobility, along with facilities related to charging points and battery replacement, play a pivotal part in enabling the objectives related to climate change."

Creduce MD Shailendra Singh Rao shares Budget 2026 expectations, urging the government to invest in Emissions Measurement, Reporting, and Verification (MRV). Discover why he believes low-carbon manufacturing is the key to India's future global trade dominance.

"India’s Budget 2026 should treat carbon intensity as a serious economic metric, not just another climate headline. Because the truth is that global trade is changing fast. In the coming years, competitiveness won’t be defined only by price and quality—it will be defined by who can prove their products are low-carbon, compliant, and future-ready," he said.