Every budget is a balancing act and Budget 2026 is even more so. After all, fiscal room has shrunk with income tax cuts from the previous year. Coupled with GST cuts that would cost the government an estimated Rs 48,000 crore in revenue, the room to spend was limited. Even so, the troika of expectations was met. These three expectations include fiscal discipline, capex push and setting a vision for a self-reliant economy.
On the first, fiscal deficit targets have been adhered to at 4.4% and the outlook for the next financial year is a very respectable 4.3%. On capex, while the speech didn’t quite make a mention, a defence capex increase of 22% to Rs 2.19 lakh crore is the need of the hour. PLI schemes for autos have been increased from Rs 2,819 crore to Rs 5,940 crore, and the spends on electronic manufacturing schemes have gone up to Rs 40,000 crore.
The most important policy push, to my mind, is to ‘Trump-proofing’ India. At a time when resources and exports are being weaponised, India needs to push domestic industry like never before. From establishing a rare earth corridor to push for states that have mining resources, and schemes to encourage the biopharma sector — all found place in the Budget.
Now, let us come to the fly in the ointment. The increase in securities transaction tax on futures and options. For futures, the tax has been increased to 0.05% from 0.02%. The hike in premium options is from 0.1% to 0.15%. The market reacted sharply as soon as the announcement came in, with the Nifty dropping nearly 3% at one point.
The reaction came from investors who were hoping for some relief on long term capital gains tax to bring back foreign investors who were, instead, handed higher taxes on an asset class that policy makers have been actively discouraging. While market experts rightly say this does not damage Indian markets in the long term; the knee jerk reaction was reflective of nervousness made worse with wild commodity swings and unpredictable geopolitical events. A balm here, may have helped. But let’s be honest. For the finance minister of the nation, markets are just one, smaller constituency to take into consideration. This is a nation of a billion aspirations and ensuring ‘Yuva Shakti’ gets prime focus. Markets, meanwhile, will have to live to fight another day.
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