Economy This Quarter: January to March 2026
1. Union Budget 2026-27: The Fiscal Arithmetic
The budget was covered in detail in our Government Schemes compilation. This section focuses on the macroeconomic implications.
| Indicator | 2025-26 (RE) | 2026-27 (BE) | Trend |
|---|---|---|---|
| Fiscal deficit | 4.8% of GDP | 4.5% of GDP | Declining. On track for sub-4.5% by 2027-28 |
| Capex | ₹11.8 lakh crore | ₹13.2 lakh crore | +12%. Continuing the capex-led growth strategy |
| Tax buoyancy | 1.2 | 1.1 (projected) | Tax revenue grows slightly faster than nominal GDP |
| Market borrowing (gross) | ₹14.1 lakh crore | ₹14.8 lakh crore | Modest increase. Manageable |
The capex multiplier debate: The government's strategy of increasing capital expenditure rests on the assumption that every rupee of public capex crowds in ₹2.5-3.5 of private investment (the "capex multiplier"). The RBI's study on the multiplier (published in the February 2026 Bulletin) estimated the actual multiplier at ₹1.8 , significantly lower. This means ₹1 of government capex generates ₹1.80 of private investment, not ₹3. The implication: capex alone cannot drive growth. Private consumption (58% of GDP) must also recover.
2. The Rupee and External Sector
The rupee traded in the ₹83.20-83.80/USD range during Q1 2026, a relatively stable quarter after the volatility of late 2025. The current account deficit for Q3 2025-26 (October-December 2025) was reported at 1.0% of GDP ($9.7 billion), significantly below market expectations of 1.5%. Services exports (approximately $45 billion) and remittances ($32 billion) more than offset the merchandise trade deficit.
The "rupee internationalisation" push: In March 2026, the RBI released a discussion paper on rupee internationalisation. Key proposals: allow non-residents to open rupee accounts in Indian banks without prior approval, permit rupee-denominated trade settlement with more countries, and issue rupee-denominated bonds in foreign markets (Masala Bonds 2.0). The context: India wants to reduce its dependence on the US dollar for trade settlement, partly as a strategic hedge against sanctions (the Russia-Ukraine experience) and partly because a widely-used rupee would reduce exchange rate risk for Indian businesses.
3. The Care Economy: Economic Survey's Thematic Chapter
The Economic Survey 2025-26 devoted its thematic chapter to the "care economy" , the unpaid domestic work (cooking, cleaning, childcare, eldercare) that is predominantly performed by women and is invisible in GDP accounting.
The numbers: The Time Use Survey (2019, updated 2024) shows that Indian women spend an average of 5.2 hours per day on unpaid domestic work, compared to 0.5 hours for men. If this work were valued at the minimum wage, it would add approximately ₹22.7 lakh crore to India's GDP , about 15% of GDP. The Survey proposed three policy interventions: expand the National Creche Scheme to cover all districts, mandate paternity leave (currently only available to central government employees for 15 days), and invest in time-saving rural infrastructure (piped water, clean cooking fuel) that reduces the time women spend on domestic labour.
This is a direct Mains topic: GS1 (role of women), GS3 (inclusive growth), and Essay (measuring what matters). The care economy connects to the feminist critique of GDP (GDP measures market transactions, not human well-being) and to the broader debate on what constitutes economic value.
For deeper context on economic concepts, read our guides on GDP, GNP and National Income and fiscal and revenue deficit.