Union Budget 2026: What’s holding companies back—and what they want the February 1 Budget to fix

Employers are no longer asking for headline-grabbing sops. They want the Budget to remove the everyday frictions that hold back investment, hiring and transformation—tax rules that discourage long-term capital, skilling that remains expensive to scale, compliance systems that still trigger disputes, and clean-energy economics weighed down by cost distortions and litigation risk.

People Matters presents the demands in order of priority: first markets and capital confidence, then jobs and skills, and finally the basics—compliance, education financing, MSME execution and sectoral constraints.

Markets and long-term capital: “stability and tax parity”

For financial markets, the Budget’s first job is to reduce uncertainty. Aditya Agrawal, CFA, Chief Investment Officer at Avisa Wealth Creators, argues that sentiment and participation—especially from foreign investors—depend on signals that the government will reward long-term capital rather than penalise it.

“The 2026 Budget is expected to be pivotal for financial markets, with a focus on stability and tax parity. Key expectations include steps to improve investor sentiment by reducing LTCG tax to 10% and rolling back STT to encourage higher FII participation. Additionally, the industry is advocating tax parity for debt instruments and structured products, many of which are currently taxed at marginal slab rates—often exceeding 40% including surcharge and cess—towards a more equitable framework that supports conservative and long-term wealth creation.”

Behind the tax detail sits a broader demand: policy that encourages patient capital. Employers want a regime that makes long-term wealth creation—and long-term risk-taking—rational again.

Jobs, employability and the workforce

If markets are one pillar, employment is the other. The sharpest employer critique is that India still measures skilling success in output metrics—enrolments, hours, certificates—while businesses struggle to hire for applied digital capability.

Mr Aditya Narayan Mishra, MD and CEO of CIEL HR, frames Budget 2026 as a decisive turning point. His emphasis is not on more training, but on employability outcomes, job quality and execution mechanisms that keep people in the workforce while they upskill.

“India’s employment challenge today is preparing for a workplace that is transforming faster than our systems of education and skilling. With nearly 70 percent of skills expected to change by 2030, driven by rapid advances in AI and automation, the gap between industry demand and workforce preparedness has become structural. This gap is most visible in applied digital skills, problem-solving, critical thinking and the ability to work effectively alongside AI systems.

Union Budget 2026 represents a critical inflection point to shift India’s employment agenda from training volumes to employability outcomes. Strengthening the MSME and startup ecosystem through improved access to capital, simplified compliance and a predictable framework for business, including exports, imports and taxation, can significantly accelerate quality job creation. When combined with targeted incentives for AI adoption and digital transformation, this approach can enable businesses to scale while generating higher-value roles.

Equally important is moving skills and technology integration from intent to execution. Bridging the industry-academia gap must become non-negotiable, with employer-led training programmes, mandatory industry immersion, faculty development in emerging technologies and industry-validated certifications that reflect real market needs. Skills development policy must transition from volume-based training to outcome-based capability building, supported by apprenticeships and modular learning models that allow professionals to upskill without exiting the workforce.

Infrastructure-led employment growth, particularly in tier-2 and tier-3 cities, can act as a powerful employment multiplier. Industrial corridors, logistics hubs and smart city initiatives, backed by stronger public-private partnerships, can create sustainable regional job ecosystems and enable employers to tap into diverse talent pools.

Employment-linked incentive (ELI) schemes should evolve to reward the creation of quality, formal jobs with longer tenures, fair wages and measurable retention outcomes, rather than headcount alone. Increasing women’s workforce participation must also be a clear priority. Incentives for hiring and retaining women, including reimbursement of maternity benefits, childcare infrastructure, flexible work policies and safe workplace norms, can help us tap into one of India’s largest underutilised talent pools.

By integrating these strategies, Budget 2026 can transform India’s demographic advantage into a sustainable economic edge, moving the country from labour-abundant to a globally competitive, future-ready talent powerhouse.”

The thrust is familiar, but the sequencing matters: capital + compliance simplification + employer-led skilling + infrastructure-led regional jobs. It is a full labour-market design problem, not just an education one.

AI skills at scale: make digital learning affordable

Employers’ second-biggest workforce ask is cost. They argue India cannot build an AI-ready workforce if quality digital learning remains priced like a premium product.

Pankaj Jathar, Chief Executive Officer, NIIT Limited, makes the case for treating digital learning as economic infrastructure, not discretionary consumption—and ties it directly to GST and public education investment.

“AI and digital are no longer peripheral skills; they are the core gateway to jobs and competitiveness. As digital learning continues to play a central role in India’s skilling journey, improving affordability will be key to unlocking its full potential. Today, most online courses fall under the 18% GST bracket, which impacts price accessibility at scale. Rationalising GST on verified digital learning programmes to a 5% bracket would make high-quality AI-enabled education more affordable, accelerate widespread adoption, and empower training providers and startups to scale sustainably in support of India’s talent ambitions.

At the same time, the nation must invest more in people. As a skilling-first enabler, we urge the government to set a clear target of 6% of GDP for education, to be delivered through higher absolute allocations that prioritise digital infrastructure, public–private skilling partnerships, and hard-to-reach geographies. India’s skilling gaps are well identified now, and this is a crucial time where we need a national push that combines fiscal incentives for low-cost digital learning with a sustained increase in public education investment to deliver both equity and economic returns.”

A parallel argument comes from Krupesh Bhat, Founder & CEO of Melento (formerly SignDesk), who warns that AI adoption breaks not at the model layer but at the organisational layer.

“The AI conversation often revolves around models, data, and compute, but the real determinant of success will be people. India’s biggest AI advantage lies in its workforce - if we treat reskilling as national infrastructure rather than an optional initiative.

This Budget should prioritise large-scale, outcome-driven upskilling across engineering, product, compliance, and operations. AI adoption fails not because technology doesn’t work, but because organisations are not ready to absorb it. Stronger incentives for industry-academia collaboration and faster pathways for applied learning can dramatically improve this readiness.

At the same time, clarity in governance will allow professionals to innovate without fear of regulatory ambiguity. If talent, policy, and execution move together, India can lead not just in building AI but in deploying it responsibly and effectively across sectors.”

Together, the ask is direct: scale skills fast, reduce cost, make governance clearer.

Clean energy economics: remove distortions, lower litigation, unlock investment

If there is one area where employers are most technical, it is clean energy—because small tax and classification issues cascade into power tariffs, project viability and investment appetite.

Mr. Vineet Mittal, Chairman, Avaada Group, wants Budget 2026–27 to focus on cost and certainty: clear tax treatment, GST corrections for storage, import duty relief for manufacturing equipment, and stronger enforcement of consumption obligations to create demand certainty.

“As India advances towards its clean energy, manufacturing and green fuels ambitions, the Union Budget 2026–27 is a critical opportunity to remove structural cost distortions and create long-term investment certainty. On direct taxes, we strongly advocate zero income tax on dividends from renewable energy SPVs to their holding companies to enable efficient capital recycling and lower tariffs. Equally important is providing clarity that income earned during the construction period should be treated as capital receipt and reduced from project cost, which will significantly reduce litigation and improve ease of doing business.

On indirect taxes, energy storage must be recognised as a core power asset. While electricity is GST-exempt, BESS and pumped storage services attract 18% GST with no ITC benefit. Reducing GST on storage charges to NIL will directly lower the cost of renewable power. We also seek zero BCD and IGST for at least five years on capital equipment for manufacturing solar glass, ingots, wafers, cells, modules, batteries and advanced TOPCon and HJT technologies, where imported equipment currently inflates project costs by 20–30%.

From a policy and regulatory perspective, stronger enforcement of Renewable Consumption Obligations (RCO) is essential to boost demand and investment certainty. For distributed energy, easy financing options for rooftop solar similar to retail consumer electronics financing and extension of the KUSUM scheme CFA sunset from March 2026 to March 2027, along with timely CFA disbursement and VGF support, are critical to address on-ground execution challenges. We also request rationalisation of project finance norms, including reducing the 75% land acquisition requirement to 50% or less, and waiver of refinancing prepayment premiums.”

The policy picture he draws is not ideological. It is operational: make projects cheaper to build, simpler to finance, and less exposed to litigation.

Compliance and social security

Even the best policy fails if day-to-day compliance remains manual and adversarial. Employers want the Budget to modernise core labour-linked systems where disputes burn time for both companies and workers.

Pratik Vaidya, Managing Director and Chief Vision Officer, Karma Management Global, argues that technology-led changes to EPFO and ESIC could reduce disputes and build trust in social security delivery.

“Payroll compliance is where policy and reality intersect on a month-to-month basis for employers and employees alike. By modernising EPFO and ESIC processes with faster claim resolution, cleaner reconciliations and a tech-based grievance redressal solution the Budget is able to massively reduce disputes. We need even stronger API-based integrations between HRMS, payroll systems and government portals so filing and paying becomes less manual and less error prone. You are very well-versed in grading on the interest/penalty system that ensures error prevention in the beginning with an eye towards genuine and wilful defaults. And as the wage structure changes, it’ll assist both employers and workers to understand what the wage and contributions are. That could be as simple as less red tape, fewer notices and more confidence in the delivery of social security.”

It is the kind of ask that rarely makes headlines, but shapes the business environment more than most incentives.

Education financing and employability

Employers are also echoing a rising middle-class pressure point: aspiration has outgrown financing systems.

Vinu Warrier, Managing Partner & Founder, eduVelocity, calls for student-centric financing with income-linked repayment and transparent scholarship delivery—alongside funding tied more closely to employability outcomes.

“As the Union Budget approaches, the education sector is looking for a shift from incremental funding to structural reform that genuinely addresses access, affordability and outcomes. Over the past decade, aspirations among Indian students have expanded rapidly, but financing frameworks have not kept pace. Higher education—especially postgraduate and global pathways—has become increasingly out of reach for middle-income families who fall outside subsidy brackets yet struggle with high-cost loans and fragmented scholarship systems. The expectation from this Budget is a student-centric financing model that combines affordable credit, income-linked repayment mechanisms and transparent scholarship disbursal.

Equally important is greater alignment between education funding and employability outcomes. Degrees alone are no longer sufficient; students need integrated career guidance, skilling support and exposure to emerging sectors. Public spending must therefore prioritise not just enrolment, but retention, completion and workforce readiness. There is also a strong case for deeper public-private collaboration in digital learning infrastructure, assessment reform and faculty development to ensure quality keeps pace with scale. Education should be treated as a long-term economic investment, not a discretionary expense. The real success of this Budget will be measured by whether a student’s future is shaped by ability and aspiration, rather than by financial constraints or lack of institutional support.”

Anil Sachdev, Founder of SOIL Institute of Management, places the spotlight on employability gaps and the unfinished job of translating NEP intent into measurable outcomes.

“There is a clear opportunity to strengthen how higher education prepares students for the evolving world of work. The National Education Policy (NEP) 2020 laid out important groundwork by emphasizing multidisciplinary learning, skill development, and industry exposure. However, outcomes on the ground suggest more needs to be made. Recent studies indicate that only around 50–55% of Indian graduates are considered employable, despite rising enrolments and digital adoption.

As AI and automation increasingly shape job roles, employability is being defined as much by human capabilities as by technical skills. Alongside creativity and critical thinking, value-based education rooted in ethics, responsibility, and social awareness is becoming essential, particularly as technology plays a larger role in decision-making. Yet less than half of educational institutions currently offer structured, outcome-driven skill or experiential learning programs aligned with industry needs.

Building on the NEP’s vision, stronger policy emphasis on industry–academia collaboration through mandatory live projects, co-created curricular, and faculty upskilling can help bridge this gap. Moving from intent to execution will be key to ensuring graduates are not only job-ready, but capable of adapting to complexity, uncertainty, and long-term career shifts.”

Sector voices: jobs, logistics and domestic value addition

Beyond the headline themes, sector leaders are pushing for practical policy fixes tied to jobs and capacity.

Gunjan Vijay Jain, President, Nuts and Dry Fruits Council (India) calls for policy support to build domestic processing and value addition through clusters, long-term credit, technology upgrades and stronger processor–farmer linkages.

Aman Moudgil, Director, Gilco Global argues that vertical mobility should be treated as essential infrastructure and seeks rationalised duties on CKD components, structured financing for retrofit lifts and targeted GST relief for senior citizens and persons with disabilities.

Sarvash Kalra, Director at Dayal Opticals points to the expansion of organised retail and the need for stronger retail infrastructure and supply-chain smoothness as demand rises.

Sidhant Kalra, Director at Khan Chacha describes changing dining patterns driven by digital ordering and argues for stronger last-mile logistics and urban delivery infrastructure to keep pace.

Sandeep Singh, Managing Director at Brawn Globus calls for policy that supports sustainable construction and wider technology adoption, paired with workforce readiness.

Prof. Nien Siao, Dean at JS Institute of Design seeks budgetary support for experiential learning and prototyping infrastructure, warning against policy that could “kill this discovery process”.

Prince Khanna, CEO at Eleve Media and CreatorTag highlights the creator economy’s formalisation and calls for stronger awareness and enforcement around online safety and cyberbullying safeguards as the sector scales.

The question Budget 2026 will answer

Employers are not asking for a single headline measure. They are asking for a Budget that behaves like an operating manual: reduce friction, reward long-term capital, scale employability, and fix compliance pipes.

If the government can deliver even a few high-impact corrections—tax parity signals, cheaper skilling, clearer clean-energy treatment, faster social-security systems—the Budget may do what employers want most: make it easier to invest, hire and plan.