An uneventful budget

Summary: The latest Budget has unsettled investors with higher transaction taxes, rising borrowings and limited structural reform. While fiscal prudence is being maintained on paper, shrinking spending space and weak tax buoyancy raise concerns about long-term growth and policy clarity. The markets reacted negatively to this year’s Budget. While investors were expecting some relief on the capital gains tax, the Budget instead sprang a surprise by increasing the rate at which the securities transaction tax (STT) is applied to derivatives. Foreign investors I spoke with said that the hike itself doesn’t make much of a difference, but is bad because it signals weak policy clarity. “The STT was introduced because the capital gains tax was made zero. Now, we have both,” one US investor said. That apart, investors are worried, he said, about the big surge in the government’s borrowing requirements. These borrowings are budgeted at 25 per cent above what the government raised in 2025-26. This column found the Budget disappointing. It is another hand-to-mouth Budget that lacks the policy clarity necessary to navigate the current context. The economy needed the budget to deliver this year on many fronts. The Budget was needed to revive global investor interest in India. Staying with the status quo poses greater risks than before because, in addition to domestic growth challenges, policy must now also prepare for and respond to the global situation. The

This article was originally published on March 01, 2026.