Finance Minister (FM) Nirmala Sitharaman presented her ninth consecutive budget on February 1, keeping the government’s focus on structural, long-term growth rather than boosting near-term market sentiment.
Experts point out that the Budget 2026 hints at the government’s clear awareness of geopolitical risks and India’s trade dynamics with the US.
The FM announced measures to strengthen domestic competitiveness, support MSMEs, and attain self-reliance in key reliance sectors.
The government focuses on long-term growth
Pankaj Pandey, the head of research at ICICI Securities, pointed out that the government is looking at more structural inflows in terms of FDI. The FM announced a tax holiday for data centres till 2047- a place where there have been the biggest announcements by foreign companies.
“If you look at the announcements and the kind of capex, it can easily overtake the kind of FPI selling what we are seeing in the markets, which can be structurally positive across the value chain, because data centres not only benefit select companies, right from real estate to power, it has implications across the value chain,” said Pandey.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, underscored that Budget 2026 was crafted with a clear awareness of India’s trade dynamics, including the US tariff, but it deliberately avoided being dependent on the outcome of a bilateral trade deal.
Srivastava highlighted that several measures in the budget were designed to cushion exporters against steep US tariffs and to strengthen domestic competitiveness.
Customs duty cuts on inputs for seafood, textiles, footwear, and leather were aimed at supporting sectors directly impacted by US trade actions, Srivastava added.
Srivastava further pointed out that concessions for SEZ units, extended timelines for exports, and liquidity support for MSMEs were introduced to ease compliance and improve resilience.
At the same time, the budget emphasised diversification by incentivising electronics, semiconductors, rare earth magnets, and container manufacturing, reducing reliance on imports and broadening India’s industrial base.
Infrastructure expansion, energy security measures, and support for services such as IT, healthcare, and tourism highlighted a broader strategy to build resilience across multiple sectors.
“In essence, while the India–US trade context shaped certain duty and export-related provisions, the budget was not US-centric. It balanced defensive measures with structural reforms, domestic capacity building, and fiscal consolidation, positioning India to withstand external shocks while pursuing sustainable growth,” said Srivastava.
“This approach reflects India’s intent to defend its exporters against US tariffs but also to diversify markets and strengthen its overall economic foundations,” she added.
Good enough to counter global risks, US tariff pain?
The Budget focuses on fiscal consolidation, which was expected by market experts.
The goal was to improve revenue and reduce spending, particularly following the previous year’s revenue loss.
“While fiscal consolidation is a great move for India, from a global market standpoint, we are not very attractive today as compared to our emerging market counterparts. This year, there is less incentive for the FIIs to enter India. We can peg this year as a stability year where we build our reserves and wait for the growth phase to kick in, maybe in a year or two,” said Shashank Udupa, SEBI-registered research analyst and fund manager at Smallcase.
“The Budget 2026 wasn’t formulated around the India–US trade deal, but it was framed to keep India ready for it. The focus on infrastructure, capex, and long-term growth reflects India’s ongoing domestic strategy, not a reaction to bilateral negotiations,” Manoranjan Sharma, Chief Economist at Infomerics Ratings, noted.
However, Sharma quickly added that these priorities also indirectly support trade talks by improving competitiveness, logistics, and policy credibility—key issues in India–US discussions.
“By avoiding deal-specific fiscal commitments, the Budget preserves negotiating flexibility while strengthening the economy regardless of whether a trade agreement materialises,” said Sharma.
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