'There’s very little left to be juiced out of the Budget': Marcellus' Saurabh Mukherjea

'There’s very little left to be juiced out of the Budget': Marcellus' Saurabh Mukherjea

• Budget seen as less impactful due to major reforms and limited fiscal levers
• Weak job creation and earnings growth remain key economic concerns
• Rising bond yields and cautious foreign investors add pressure to markets

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Ahead of the Union Budget 2026, investor expectations remain tempered amid a slowing earnings cycle and tighter fiscal conditions. In a conversation with Moneycontrol, Marcellus Investment Managers’ Saurabh Mukherjea explains why the Budget’s ability to materially alter economic outcomes has diminished over time, even as pressures from weak job creation, slowing tax revenues and rising bond yields continue to shape the market backdrop.

How important is the Union Budget for you as an investor this year?

By and large, the Budget has become a relatively inconsequential event.

GST is outside the Budget. Cigarette taxes have already been announced. Free trade agreements are not part of the Budget. So many of the big economic levers simply don’t sit there anymore. In that context, focusing too much on the Budget does not make sense.

You’ve spoken about weak earnings growth. How is the current earnings season shaping up?

It has been a disappointing earnings season. We’re about to enter the third year of low single-digit earnings growth.

The bigger issue is that we haven’t had meaningful white-collar job creation for a couple of years now. Without job creation, you don’t create new income-tax payers. Without income-tax payers, it’s very difficult to grow tax collections. Weak job creation also feeds into weaker consumption and, eventually, weaker earnings growth.

Despite multiple efforts — income-tax cuts, GST cuts, RBI rate cuts — earnings growth is still stuck at around 5 to 6%. We’re heading into the third year of low single-digit earnings growth, which mirrors what’s happening with government revenue growth as well.

So does that limit what the government can realistically do in the Budget?

If you go back in time, the budget used to be more significant because it was the primary window into how the government managed the economy. Since then, major reforms have taken place thus reducing the number of levers available on Budget day.

The tax buoyancy required for tax cuts simply doesn’t exist today.

I would love to see income-tax cuts, corporate-tax cuts — especially for smaller companies — and even rationalisation of capital gains taxes for foreign investors. But given the current fiscal stress and weak revenue growth, it’s difficult to see how the government can pull that off without risking fiscal stability.

That’s why I say there’s very little left to be juiced out of the Budget.

Where do you see the real economic stress points, if not in the Budget?

Job creation is weak, aggregate demand is weak, and that’s reflected in both earnings and tax collections.

On top of that, RBI data shows an explosive rise in retail borrowing excluding home loans over the last five years. Alongside deterioration in credit quality that’s a warning sign.

Externally, US tariffs are already hitting export-oriented clusters — textiles, jewellery, carpets, sports goods. Job losses in these sectors will eventually show up in consumption numbers.

And then there’s AI. Even before AI fully kicks in, white-collar hiring has slowed sharply. A recent NITI Aayog–NASSCOM report suggests that up to 20% of jobs in IT and customer experience roles could be disrupted over the next few years. These sectors were India’s biggest job creators until recently.

How does this backdrop affect fiscal policy and markets?

The government is likely to stick to fiscal discipline. They may meet deficit targets using RBI and PSU dividends, but beyond that, there’s limited room to loosen spending.

That puts pressure on PSU and state finances, which in turn pushes more borrowing into the bond market. As a result, bond yields are already rising and could keep rising even after budget day.

Equity markets are in a tricky spot. Any Budget-led rally may simply give foreign investors a better exit opportunity, especially given how stretched valuations already are.

So, what are your expectations from this Budget, overall?

My expectations are muted.

This is an unusually difficult Budget. The economy is slowing, fiscal room is limited, bond yields are hardening, the currency is under pressure, and foreign investors are cautious.

Many of the challenges we face today are structural and global in nature. They are not things that any single Budget can easily fix.