Budget 2026: Market Expert Seeks Better Govt Spending To Fix FII Exodus—'No Clean Air To Breathe'

India Inc gears up for the upcoming Budget 2026 when Finance Minister Nirmala Sitharaman will unveil the new set of fiscal interventions and policy announcements in the Parliament on Feb, 1, 2026. Ahead of the much-anticipated event, market experts seek efficient government capex, low interest costs and push deregulation across various sectors.

In an exclusive interaction with NDTV Profit on Jan. 7, 2026, Ajay Srivastava, MD, Dimensions Consulting has highlighted that India's main challenge in 2026 is the efficiency of government spending including capex. The market veteran has warned that foreign capital inflows to India may stay muted this year as well due to the country's pertinent 'health hazard'

'No Clean Air': How will FII/FDI inflows sustain?

'When we talk of FIIs, FDI coming in, let's understand how the investments enter because environmentally, we have a problem,'' said Srivastava. He referred to the rising levels of AQI and pollution which has made daily life difficult across metropolitan cities. The living quality has drastically come down over rising cases of respiratory diseases, allergies, and low immunity levels reported by individuals across all age groups in Delhi, Mumbai.

Srivastava asks, ''How do you convince a foreigner to invest and live in this country if this is what we present?'' The market expert seeks a more efficient government capex from Budget 2026, which is ''accountable and in-line with strengthening the living standard of this country''.

''Economics will work if you are healthy. Otherwise, what's the point if having money in the bank, if you can't breathe clean air? I am a citizen so I have no choice'', he said. However, the government has a discretion of FDIs investment to come or not, according to the market veteran.

''Unfortunately, this has become a big criterion because when we talk to all companies overseas who say how to bring people in this country if you have a health hazard sitting out there,'' said Srivastava. ''So, we are looking at efficiency of government spending, resolving the environmental crisis and better city infrastructure more than everything else,'' he added.

Referring to the government, Srivastava claimed, ''You got to get capital and get people to stop taking money out of this country.'' According to the expert, that's the real issue and a challenge for India in 2026.

Budget 2026: Deregulation on the cards?

Interest costs is the biggest component of our budget and the biggest component of what's holding back growth, according to Srivastava. ''The current interest cost does not leave much scope for Indian corporates to produce goods which are globally competitive,'' he said. With Budget 2026, the Centre is expected to deepen its push for deregulation across sectors.

The market expert sees deregulation in two aspects. Improving PSUs and better convenience of business in the country. He seeks lower interest costs for corporates to come down, especially at a time when the state government is borrowing at a rate of 7.7%. ''At this rate, what do you expect the corporates to do?,'' he told NDTV Profit.

Centre's fiscal prudence, health of states' balance sheets

Srivastava goes on to say, ''Why is it that our 10-year yield is stubbornly at 6.6% even after 125 bps rate reduction by the RBI? The reason is, we're borrowing much more than the people can provide you money with it.''

''You see the stress in the banking sector. RBI can keep playing back and forth and it has paid the price with rupee crashing to record low levels against the US dollar. So, they can play with interest rates but they'll have a rupee depreciation cost which is now at 15-17% in euros/pounds and 5-7% in dollars. That's a hell of a cost to pay,'' said Srivastava.

''The Centre doesn't have its act together, otherwise the yield would not have still been at 6.8% for 10-year bonds. So, it is a major issue. Globally, institutions are looking at it. And then we wonder why Rs 2.7 lakh crore went out of this country last year. It's apparent,'' he explained.

According to Srivastava, people have been shoved into mutual funds because interest rates are low so people don't want to put money in fixed deposits and savings. The pain is lower interest costs at the retail level and higher interest costs at the corporate level, is bothering the system.

''So overall, the retail interest cost has to go up so that people can money money for investment and government interest cost has to go down and they need to borrow less. It's as simple as that'' he concluded.

Which sectors should you bet on?

According to the market veteran, autos are doing well after the GST rate cuts and gold loan companies as well after the spike in gold prices. ''It is the best and cheapest way to borrow money in the market,'' he said on gold loan companies. He noted that the duopolies will also do very well., whether it's the stock exchange or the telecom as there is no competition.

For metals and mining sector, the market expert noted that there has been a resurgence. Two more sectors where Srivastava bets on are engineering, hospitals, and healthcare. However, he doesn't want to bet on retail as the valuations of FMCG and consumer companies have extremely stretched valuations.