At its core, the Union Budget 2026 is about building strategic autonomy. The continued emphasis on infrastructure will lift national output, but the parallel push to strengthen domestic manufacturing is equally vital, as it reduces import dependence and enhances self-sufficiency in an uncertain global order. Capital expenditure has been a defining feature of recent budgets, yet the renewed focus on sectors such as semiconductors, rare earths, biopharma, chemicals, and advanced materials indicates the government’s intent to shield the economy from geopolitical risks. This approach gains relevance in light of the Economic Survey’s warning that emerging markets could face future shortages of base metals, crude oil and pharmaceutical inputs, all areas where India remains heavily import-reliant. The budget, therefore, rightly prioritises building domestic capacity to withstand supply-chain shocks and the weaponisation of trade. If roads, railways and ports create assets, jobs and incomes, then investments in capital goods, textiles, sports equipment, precision manufacturing and allied industries will add industrial depth and keep the growth engine running smoothly.
On budget math, Finance Minister Nirmala Sitharaman remained conservative about the fiscal deficit, gross borrowings, expenditure, and taxes. For FY27, the fiscal deficit has been set at 4.3 percent, marginally lower than the 4.4 percent projected for FY26, with a sharper focus on reducing the overall debt burden. The debt-to-GDP ratio is expected to ease to 55.6 percent from 56.1 percent a year earlier. Total expenditure is budgeted to rise by a modest 7.7 percent to ₹53 lakh crore. While most of the projections seem credible, there is caution writ large. A 10 percent rise in capital expenditure seems achievable, but overall revenue, capital receipts and tax collections are projected to grow at roughly seven percent, a cautious assumption that could eventually prove understated. Defence allocations were enhanced, but spending on health, education and rural development saw limited expansion. Overall, the budget reflects a clear preference for prudence over populism, efficiency over excess. The moral calculus may invite debate, but the fiscal arithmetic remains internally consistent.
Markets, however, reacted adversely. Sunday witnessed the worst budget-day stock market performance on record, with the Sensex and Nifty plunging over 2,000 points and 600 points, respectively. The immediate trigger was the hike in Securities Transaction Tax on futures and options, justified by the government as a step to curb excessive speculation that has inflicted heavy losses on retail investors. Disappointment was compounded by the absence of clarity on long- and short-term capital gains taxes, as well as changes to taxation on Sovereign Gold Bond redemptions. However, markets are not the economy, and budgets need not be market-centric. The country needs foreign capital, but perhaps the government believes it can attract and retain capital by building strong economic fundamentals. Lastly, the wait for the salaried middle class grew longer as Sitharaman’s tax sops were limited to reductions in TCS and TDS. Still, the forthcoming Income Tax Bill promises simpler laws and fewer compliance requirements for taxpayers. For the world, though, Budget 2026 signals stability and strategic long-term growth.