Nirmala Sitharaman’s Budget 2026 Lacked The Big Bang That Markets Wanted

By Govindraj Ethiraj

It was the worst budget-day performance in the markets in six years. 

Perhaps the markets should have remained shuttered on Sunday; a Monday opening might have allowed investors more time to digest the announcements in the Union Budget 2026. 

But the gates were open, and the markets sank like stone even as Finance Minister Nirmala Sitharaman announced a higher Securities Transaction Tax (STT) on futures trades.

The immediate selloff raises a larger question of whether this is purely a reaction to the trading tax, or was there a more profound void in the Union Budget that prompted such a negative response? 

It is increasingly clear that this was not the big bang budget many had anticipated, particularly given the global turmoil. 

Instead, it was a collection of announcements like the Budgets of old — some new and welcome, many others merely building on the past.

Among noteworthy announcements were a continued infrastructure push, with plans to spend around Rs 12.2 trillion($133 billion) on infrastructure in the next financial year, about a 9% increase from last year. 

The minister also proposed several exemptions on customs duties across sectors, including critical minerals, nuclear energy, batteries, electronics, defence and aviation, among others.

She said these exemptions were aimed at simplifying tax rates, supporting domestic manufacturing, boosting exports, and removing old duty exemptions that are no longer needed. 

Could all of this provide a leg-up to companies fighting to regain a foothold in tariff barred American market?

We will have to wait and see.

Tactical, Not Breakthrough

In its post-budget reaction, Moody’s Ratings characterised the roadmap for the next financial year as tactical rather than a breakthrough. 

While the fiscal deficit is projected to narrow to 4.3% from 4.4%, the rating agency noted this would not be enough to shift India’s credit profile. "Despite a lengthening track record of deficit consolidation, this deficit is still wider than what it was prior to COVID," a senior  Moody’s official told Reuters.

Sitharaman’s ninth budget was a catch-all affair. There were fresh perspectives on health and tourism-linked employment, including a plan to train 150,000 caregivers — a nod to India’s ageing population, which now exceeds 150 million. 

Similarly, tourism saw several investment pledges, including the development of Buddhist temple circuits in India’s Northeast.

The CEO of the government's planning body, NITI Aayog, described it as a "services budget," highlighting that the speech should be viewed as an extension of the previous two years — a policy of continuation.

The Stability Paradox

Continuation, however, was not what the market expected. 

While some argue that steady steps are the best medicine for a fragile global system, what is needed in these times are moves that are exponential.

For smaller enterprises, the budget offered several gestures, yet it remains unclear how these make it substantially easier to navigate the daily grind of compliance and logistical hurdles. 

The Budget did emphasise the next generation manufacturing thrust — focusing on semiconductors, biopharma, and renewables — but once again, it lacked the big bang intent required to lure massive foreign investment amid rising geopolitical tensions.

Small Mercies And Hard Truths

On the individual and corporate tax front, there was silence — hardly surprising given that a new Income Tax Act is slated to kick in on April 1. 

There were tax holidays for data centre investments as well as friendlier tax regimes for global capability centres (GCCs), all of which were expected.

International travellers received a minor consolation: the duty on personal items and parcels has been halved to 10%. 

Shopping abroad and bringing goods back may now be more satisfying, provided one can ignore the depreciating rupee. 

Ultimately, the Sunday session proved that while you can force the markets to work on a weekend, you cannot force them to cheer for incrementalism.

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Rs 12.22 lakh crore

That’s how much the budget for FY27 pegged Centre’s public capital expenditure, underscoring the government’s push to sustain infrastructure-led growth. The proposed figure works out to 3.1 per cent of the GDP. This includes capital support to States through SASCI (Special Assistance as Loan to States for Capital Expenditure) with an outlay of Rs 2 lakh crore.

Overview: The effective capital expenditure in FY 2026-27 is estimated at Rs 17.15 lakh crore, which is 4.4 per cent of GDP.

Setup: The government will step up infrastructure development in Tier-2 and Tier-3 cities and set up a risk guarantee fund for the infrastructure sector, Finance Minister Nirmala Sitharaman said in her speech.