Budget to strengthen the foundation for investment led growth though FM may appear devoid of big bang announcements

Nilesh Shah is the Managing Director at Kotak Mahindra AMC

• Union Budget may appear devoid of big bang announcements
• Budget could well be reform focused blueprint aimed at positioning India for sustained high growth over the coming decade
• Government seeks to accelerate India’s transition toward modern, competitive and resilient economy

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Presented with a framework of Three Kartavyas viz. 1) acceleration and sustenance of economic growth, 2) fulfilling aspirations of people making them partners in India’s economic progress and c) ensuring inclusive development – shaped the proposals in Union Budget 2026-27. Economic Survey 2025–26, which projected GDP growth of 7.4% for FY26 and 6.8–7.2% for FY27, was the backdrop for the government’s fiscal and economic roadmap for the year ahead.

On the fiscal front, the Minister reaffirmed the government's path of consolidation. The fiscal deficit for 2026-27 is estimated at 4.3% of GDP, with a target to reach a debt-to-GDP ratio of 50%, ±1% by 2030-31 (as compared to 56.1% in FY26) to free up resources for priority sector expenditure by reducing the outgo on interest payments.

Through the current financial year, Government fired multiple bullets to boost consumption and in this Budget one was keenly watching what Govt can do to crank up investment sector. The Budget continued focus on public Capex which has been raised to Rs 12.22 lakh crore for FY27, up from Rs 10.96 lakh crore in FY26 RE — reflecting nearly 11% growth.

India Semiconductor Mission 2.0, with upgraded capital outlay of Rs 40,000 crore is focused on building full stack Indian semiconductor design and manufacturing capabilities, including equipment and materials production. Dedicated Rare Earth Corridors, three new Chemical Parks, Hi-Tech Tool Rooms for high-precision components, will enable domestic availability of input materials for manufacturing and infrastructure. Development of 7 High-Speed Rail corridors, 20 new National Waterways over the next five years, Scheme for Container Manufacturing will provide critical logistical support for the industries.

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Sector specific measures include a big boost that has been given to the data centre business by offering a 20-year tax exemption for the cloud service providers. Outlay of Rs 10,000 crore for transforming India into a global hub for biologics and biosimilars under Biopharma SHAKTI should help India position as emerging destination for conducting clinical trials. Proposal to set up High Level Committee on Banking for Viksit Bharat for comprehensive review of the sector aims to align it with India’s next phase of growth.

Intending to empower young India through manufacturing expansion, skill development, infrastructure upgrades, technological innovation, and job creation, this Budget is laying platform for future ready industrialisation and capacity building.

A notable announcement was the completion of the review of the Income Tax Act 2025 which will come into effect on 1st April 2026, promising simplified rules and redesigned forms for ordinary citizens. While there are no changes to income tax slabs, related measures including rationalization of TCS rates for certain activities, are aiming at improving ease of compliance and providing tangible relief to small taxpayers.

From capital market’s point of view, important measure was that of rationalization of buyback taxation under which the consideration received by a shareholder during a buyback will now be chargeable under the head 'Capital Gains' instead of being treated as dividend income, intended to protect the interests of minority shareholders. While there is introduction of additional buyback tax specifically for promoters, even if at slightly higher rate, it is better than dividend tax. This move will bring Buybacks as viable option of returning capital. However, increase in Securities Transaction Tax rate on futures & options could be perceived as negative for certain sections of the markets.

Union Budget presented by the Finance Minister may appear devoid of big bang announcements but it could well be reform focused blueprint aimed at positioning India for sustained high growth over the coming decade. By boosting capex, simplifying taxes, strengthening connectivity, and emphasising inclusive development, the government seeks to accelerate India’s transition toward a modern, competitive and resilient economy.