Virendra Pandit
New Delhi: Apparently unhappy with ‘fiscally prudent’ budgeting, finding little fireworks, and ignoring the government’s concerns over the fast-changing geoeconomic and geopolitical scenario to safeguard the gains made so far, the Indian stock markets reacted hastily and lost over 1% of their value when Finance Minister Nirmala Sitharaman tabled her ninth consecutive Union Budget for 2026-27 in the Lok Sabha on Sunday.
While the benchmark Sensex lost 1,128.09 points to close at 81,141.69, the Nifty50 lost 389.35 to close at 24,931.40, showing undue volatility through the day.
The experts, however, believed it was a silent workman’s budget with an eye on the future and a keeping a long haul in mind. It has continued focus on capital expenditure and, even as the private sector seemed disinterested, the Centre decided to go ahead in this respect
Of course, the FY27 Budget had little for the markets or the common people to cheer about. Even Finance Minister Nirmala Sitharaman, without playing to the gallery, delivered proposals matter-of-factly. But she focused on controlling debt, and its policy announcements aimed at building a resilient, self-reliant economy.
Despite diminished tax revenues, the Centre has contained fiscal deficit to 4.4 percent of India’s GDP in 2025-26 and committed to bring it down to 4.3 percent in FY27. It will potentially decrease debt-to-GDP ratio down to 50 percent by 2031.
The debt-to-GDP ratio of 55.6 percent of GDP in FY27 is lower than the 56.1 percent in FY26. The gross market borrowing of Rs. 17.2 lakh crore is, however, a concern. The RBI may conduct open market operations of over Rs. 2 lakh crores to absorb the supply and support the government borrowing program.
Sitharaman has budgeted for a modest increase of 8 percent in gross tax revenue, which is much lower than the 10.8 percent growth in FY26. In view of the rate rationalisations in GST, its collections for FY27 are estimated at the same level as the revised estimates for FY26. Similarly, income tax collections are budgeted to grow at a conservative 11.4 percent.
Though non-tax revenue in the form of PSU dividend and dividend from RBI may help the budget numbers in FY27, the non-tax revenue to FY27 is maintained at Rs. 6.66 lakh crore in FY27, almost unchanged from the revised estimates for FY26.
In the absence of private sector’s capital expenditure (capex) picking up significantly, the Centre has continued to do it. The next year’s capex is budgeted to grow to Rs. 12.2 lakh crore in FY27, up 12 percent from the revised estimates for FY26.
Markets
The stock market has clearly been unhappy with the Fy27 Budget. The benchmark indices, the Nifty50 and the Sensex, were down over 1 percent by the time Sitharaman finished her speech.
Stock markets, which hoped for a cut in Securities Transaction Tax (STT), were in turn slapped with increase in STT on futures to 0.05 percent from present 0.02 percent. This is a transaction-based tax levied on the purchase or sale of specified securities traded on recognised stock exchanges, not on profit or income. Instead, it is charged at the time of executing the transaction itself.
The STT on options premium and exercise of options have also been increased to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively. Even the SEBI has been highlighting the increased presence of retail investors in equity derivatives and how they are consistently making losses.
Eye on the Future
The FY27 Budget has come against the backdrop of a strong domestic economy amid mounting global challenges. Though the GDP growth has rebounded to 7.4 percent for FY26, led by strong growth in services and recovery in manufacturing, it has to grapple with the uncertainty caused by the tariff war unleashed by US President Donald Trump’s administration. It has prompted India to re-think long-term global alliances, re-build domestic capabilities in manufacturing and technological heft and to rollout an insulated economy capable of taking on similar challenges in the future.
The thrust on building manufacturing capabilities, incentives to mine rare earth minerals, tax holidays to foreign companies setting up data centres, etc., are all aimed at making India emerge as a manufacturing hub for upcoming technologies and to build domestic capabilities in sunrise sectors. This is of paramount importance if the nation has to face the potential global disruptions in trade and supply chains and become entirely self-reliant.
The ‘disappointment’ in the Budget is that there is very little by way of a consumption boost. But with the large income tax and GST cuts already done over the past year, that may be unrealistic.