By Jiju VidyadharanThe Union Budget 2026 provides the government an opportunity to accelerate India’s economic transformation in the wake of prolonged global uncertainties and higher tariffs imposed by the United States.Crisil has projected India’s gross domestic product (GDP) growth at 7% for fiscal 2026, driven by consumption support, government’s infrastructure thrust and policy initiatives. According to the forecast by the International Monetary Fund’s World Economic Outlook Report of April 2025, India is the world’s fourth-largest economy and could surpass Germany to become the third-largest in the next three years, with GDP projected to reach $7.3 trillion by 2030. Rationalisation of the goods and services tax rates and strong balance sheets of corporates and financial institutions, coupled with supportive monetary and fiscal policies, are expected to bolster economic activity.The next phase of India’s growth will not only be driven by government spending or corporate capital expenditure but also household participation in the financial markets. India has relatively higher savings rates 1 among top economies. Within gross financial savings, we see increased allocation to capital market instruments like mutual funds and insurance. Indian households have traditionally favoured fixed-income products. Globally, there are two avenues of funding growth—loan and capital markets. The domestic mutual fund industry’s assets under management (AUM) clocked a CAGR of over 20% in the past five fiscals to reach Rs 80.23 lakh crore as of December 2025. The mutual fund folio count rose 16.11% on-year to 26.12 crore. Systematic investment plan (SIP) assets stood at Rs 16.63 lakh crore, accounting for 20.7% of the overall mutual fund assets, driven by the highest ever monthly inflow of Rs 31,002 crore. While retail participation in equity markets has seen strong growth, largely driven by SIPs and market-linked returns, debt remains underrepresented in household portfolios, with savings still skewed toward traditional fixed deposits. Debt AUM as a percentage of total AUM declined to 22.6% from ~45% in December 2020.Against this backdrop, we have two key expectations from the budget from a personal finance standpoint:Incentives for the debt marketDeepening the debt market is critical from an issuer’s perspective to ensure access to long term, cost-effective funding and an investor’s perspective, offering liquidity, transparency and risk diversification. Asset allocation plays a critical role in building long-term financial stability and the growth of the debt market is central to this balance. Strengthening the debt market through targeted incentives such as tax efficiency, product innovation and greater awareness can encourage a gradual shift from plain fixed deposit products to diversified debt instruments. This will not only improve risk-adjusted outcomes for investors through better asset allocation but also channel a larger pool of household savings into the formal debt market, enhancing liquidity, deepening market depth and supporting the overall financial system. 1.Tax incentives for investors: Restore indexation benefits for long-term debt investments, lower capital gains tax on debt mutual funds held beyond a defined period.2. Incentives for greater participation in market-linked debt instruments: Promote and encourage higher retail participation through online bond platform providers with simplified know your customer norms and lower ticket sizes. In addition, provide budgetary support for financial literacy on debt products and asset allocation.Social security—Retirement and insuranceSocial security in India continues to have significant scope for deeper penetration, especially across the vast unorganised sector where formal retirement and protection mechanisms remain limited. While salaried participation in structured retirement products has improved, a large segment of the workforce still lacks access to pension and insurance cover, underscoring the need for wider inclusion. Over the past year, the National Pension System has seen meaningful refinements in the form of greater flexibility, improved choice architecture and efforts to enhance ease of participation, strengthening its position as a core retirement product. With a broader product basket now in place, there is an opportunity to introduce targeted incentives and policy measures to widen retirement coverage in the unorganised sector. To widen the social security net, a mutual fund voluntary retirement account (MF-VRA) scheme can be rolled out, which aims to provide a voluntary, employer-linked retirement product, managed by mutual funds, similar to the US’ 401(k) plan. The MF-VRA scheme could build on the long-term policy laid out by the Securities and Exchange Board of India, enhancing reach and promoting financial inclusion. It could ride on the growth of mutual funds in India, which has crossed assets worth Rs 80 lakh crore as of December 2025. Personal finance and economic growth are intricately linked. Put simply, when individuals invest wisely through diversified equity and debt instruments, their financial security improves and the economy benefits from long-term capital. A well-crafted budget has the potential to unlock new opportunities for growth and with careful planning and foresight, individuals can make the most of it.(Jiju Vidyadharan is Senior Director, Crisil Intelligence)
