OPINION | Pre-Budget Expectations for Investment: Turning momentum into credible capital

Investors today are willing to allocate capital to India.

As India approaches the Union Budget for 2026–27, the investment narrative is undergoing a quiet but important shift. The debate is no longer centred on whether public capital expenditure can drive growth—it has already proven its effectiveness. The more critical question now is how this momentum can be translated into sustained private and foreign capital, while strengthening institutional credibility and preserving fiscal discipline.

From the perspective of the India Investment Roadmap, the forthcoming Budget is less about headline-grabbing announcements and more about reinforcing predictability, execution capability and policy continuity. Global investors today are willing to allocate capital to India, but increasingly judge the market on its ability to convert intent into outcomes.

What Are Long-Term Investors Looking for?

Long-term institutional investors—sovereign wealth funds, pension funds and global insurers—seek scale, visibility and continuity, with investor conversations having evolved well beyond headline quantum. What matters to them now is:

* project readiness rather than pipeline size

* front-loaded land and regulatory clearances*

* consistency between central and state-level execution

Public capital expenditure, when deployed with discipline, becomes more than a stimulus—it acts as a signal of credibility, anchoring long-term private investment.

Reducing Non-Market Risks

Despite policy liberalisation, non-market risks—delays, cost overruns and regulatory ambiguity—continue to influence investment decisions. The institutionalisation of a Capital Expenditure Efficiency Framework (CEEF) would therefore represent a meaningful reform. From an investor’s perspective, such frameworks are critical to shifting India’s image from a high-potential market to a high-delivery market.

Regulatory friction, rather than regulation itself, remains a key concern for multinational investors. A robust single-window clearance mechanism with defined timelines continues to be a strong expectation, particularly for greenfield and infrastructure projects. However, any meaningful reform must recognise that delays often arise at sub-national levels, making centre–state coordination essential.

On taxation, the message from investors is clear: stability matters as much as incentives. Predictable interpretation, reduced disputes and simplified compliance—especially for foreign portfolio investors—can materially improve capital-market confidence and attract longer-tenure flows.

Sector-Led Investment Momentum

India’s investment roadmap is increasingly sector-led, driven by geopolitical realignments and structural demand. Key sectors already enabled and deepened include:

# renewable energy and energy storage

# electronics and semiconductor ecosystems

# data centres and digital infrastructure

# defence manufacturing and aerospace components

Looking ahead, sectors with strong potential to attract capital include:

- advanced clean-energy technologies (green hydrogen, battery recycling)

- global capability centres (GCCs) and AI-led services

- healthcare manufacturing and med-tech

- logistics, warehousing and multimodal infrastructure

Sustaining momentum in manufacturing will also depend heavily on MSMEs. Strengthening MSME clusters—particularly in tier-2 and tier-3 cities—through targeted infrastructure, easier access to credit and simplified compliance is not peripheral; it is central to supply-chain resilience.

FDI and the Next Phase of Reform

As India integrates more deeply into global capital markets, its financial architecture requires continued evolution. Strengthening GIFT City as an International Financial Services Centre (IFSC) has already yielded results, with new activity across:

1) fund management and alternative investment funds

2) reinsurance and insurance-linked securities

3) foreign universities

4) bullion exchanges

5) cross-border treasury operations

From an investment perspective, the next logical step may be selectively replicating the IFSC model in other financial hubs, creating a networked ecosystem rather than a single-point solution. Expanding IFSC-like frameworks to cities with financial and sectoral depth—while maintaining regulatory consistency—can significantly enhance India’s ability to intermediate global capital domestically and reduce offshore dependence.

Foreign Direct Investment (FDI) remains a central pillar of India’s long-term capital strategy, not merely as a funding source but as a conduit for technology transfer, managerial expertise and integration into global value chains. While India has progressively liberalised FDI across sectors, the next phase of reform must focus on deepening quality, predictability and ease of execution rather than expanding sectoral eligibility alone. From an investor standpoint, the effectiveness of the FDI regime increasingly hinges on:

i) faster and more predictable approval timelines

ii) consistency in policy interpretation across authorities

iii) reduced friction between central policy intent and on-ground implementation

There is also a growing case for targeted FDI facilitation, especially in sectors aligned with India’s strategic priorities—advanced manufacturing, clean energy, digital infrastructure, defence and healthcare. Rather than broad-based incentives, global investors are seeking clarity on operating conditions, exit certainty and long-term regulatory stability.

Strengthening FDI Through Execution

In this context, further expansion of the automatic route, greater reliance on post-facto compliance rather than pre-approvals, and stronger institutional mechanisms for investor grievance redressal can materially improve India’s FDI experience. For large, long-gestation projects, such measures are often more decisive than fiscal incentives.

Strengthening the FDI framework is not about attracting capital at any cost, but about anchoring committed, long-term investors who view India as a core operating geography rather than a tactical allocation. Aligning policy design with execution certainty will be critical to sustaining FDI inflows that are both stable and value-accretive.

Beyond traditional FDI and FPI, structured mechanisms to channel diaspora capital into infrastructure and emerging technologies offer a stable, relationship-driven funding source. Well-governed platforms can complement domestic institutional capital and provide patient funding for long-gestation projects.

The Union Budget 2026–27 represents a critical inflection point. Its success will not be measured by the breadth of announcements, but by the credibility of institutions, quality of execution and predictability of outcomes. Public capital expenditure, when anchored in discipline and clarity, can serve as a strategic magnet; crowding in long-term private and foreign capital.

From India’s investment-scenario perspective, this shift—from expansion to execution—will define India’s investment competitiveness in the decade ahead.

(Krishan Arora - Partner, Devika Dixit – Executive Director, Prateek Bindal – Manager at Grant Thornton Bharat LLP.)

Views are personal, and do not represent the stand of this publication.