Budget 2026 expectations: Why the next phase of financial growth is affordable, smarter credit

By Manish Shah

India’s financial system has crossed an important threshold. Access to credit is no longer the binding constraint it once was. Today, households and enterprises that want credit can largely obtain it. The more relevant question now is whether the terms of finance such as the cost, tenure, liquidity, and risk sharing are aligned with the kind of long-term growth India is aiming for.

Capital is available, but decision-making has become more deliberate. Borrowers are not stepping back from finance, they are weighing certainty, affordability, and long-horizon comfort far more carefully than before.

That is where Budget thinking for 2026 and beyond can play a catalyst for higher and more inclusive growth.




From Credit Expansion to Risk Sharing

The next phase is not about simply pushing more credit into the system. It is about reducing the friction and cost around long-term borrowing without weakening discipline. The most effective way to do that is through deepening the market.

Well-designed guarantee and co-lending frameworks that are built on models like CGTMSE that allow risk to be distributed more efficiently between the government and lenders. When risk is shared intelligently, the cost of credit falls naturally. This creates space for longer tenures, smoother repayment structures, and greater borrower confidence, especially for MSMEs and first-time formal borrowers.

Liquidity Is the Binding Constraint

Lower cost of credit, however, cannot be sustained without adequate liquidity. India’s financial system needs stronger, more stable domestic funding. Yet household savings have increasingly migrated toward equity, not always by choice, but because tax structures favour it. Fixed-income instruments, particularly fixed deposits, need renewed relevance in household portfolios.

Alongside, targeted tax benefits for fixed-income savings can deepen liquidity, strengthen Current Account and Savings Account (CASA) growth, and lower system-wide funding costs. This is not about discouraging equity participation, but about restoring balance so asset allocation reflects suitability rather than tax distortion.

A similar principle applies to household wealth locked in real estate.

Real estate remains the single largest repository of personal wealth in India, yet capital mobility from property into financial assets remains constrained. Allowing proceeds from real estate sales to be deployed into financial instruments at lower capital gains tax rates would unlock liquidity already within the system. This would let households rebalance portfolios as their needs evolve, freeing capital for productive use rather than locking it in illiquid assets.

Expanding the Tax Base by Valuing Compliance

As we unlock liquidity, we must also broaden the tax base - through encouragement, not only enforcement.

Tax compliance improves when it is visibly valued. High-compliance taxpayers contribute disproportionately to fiscal capacity yet often feel least acknowledged. Combining compliance with tangible benefits such as dedicated service lines, straight through approvals wherever feasible, faster immigration or visa support, and premium government interfaces can restore the prestige of paying tax. The goal is simple: make formal and higher participation feel rewarding, not merely obligatory, and visibly recognize those who contribute most.

Strengthening India’s Financial Framework

Taken together, these ideas point to a common theme. India does not need a larger financial system. It needs a system where liquidity is deeper, risk is shared more effectively, capital moves more freely, and compliance is aspirational.

Budgets that enable these shifts may not announce themselves loudly, but they shape economic behaviour in lasting ways.

That is the kind of financial architecture India can benefit from in its next phase of growth.

(Manish Shah is MD & CEO of Godrej Capital)