Budget structurally bullish, making India structurally stronger by 2030 but tactically neutral for equities in near term

Trideep Bhattacharya is the President & CIO-Equities at Edelweiss MF

• Budget 2026 designed to make India structurally stronger by 2030 and globally competitive by Viksit Bharat 2047
• It is a growth-compounding budget rather than a momentum-trading budget

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Union Budget 2026 chose kartavya over excitement — and that is both its core strength and its near-term market constraint

The Budget prioritises macro stability, strategic capacity building and long-cycle productivity investments over immediate consumption stimulus or liquidity-led growth. In essence, it is a growth-compounding budget rather than a momentum-trading budget.

The government has stayed firmly committed to fiscal discipline, targeting a fiscal deficit of ~4.3% of GDP while still expecting ~7% real GDP growth — reinforcing policy credibility amid elevated global macro volatility. Capital expenditure remains the central growth lever, rising to roughly Rs 12.2 lakh crore for FY27 and extending India’s multi-year public investment cycle across infrastructure, logistics and industrial capacity.

The moderation in fiscal consolidation — from a sharp ~125 bps cumulative reduction over the last two years to a calibrated ~10 bps next year — should be viewed as structurally growth positive. It signals policy confidence to sustain public capex and strategic investments while preserving fiscal credibility, striking a balance between macro stability and growth momentum rather than pursuing excessive near-term tightening.

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Defence spending continues its structural upcycle. Total defence allocation has increased to Rs 7.85 lakh crore (from Rs 6.8 lakh crore earlier), with capital defence outlay rising sharply to Rs 2.31 lakh crore — signalling accelerated modernisation, import substitution and deeper domestic indigenisation. This aligns with India’s evolving geopolitical realities while strengthening the domestic defence manufacturing ecosystem.

Manufacturing is clearly the second strategic pillar. Semiconductor Mission 2.0 carries an outlay of Rs 40,000 crore, while broader manufacturing initiatives span biopharma, electronics components, rare earths, specialty chemicals and advanced materials — directly targeting supply-chain resilience and import substitution. These measures are central to India’s ambition to move up global value chains over the next decade.

Technology and digital infrastructure are emerging as structural multipliers. Incentives for data centres, AI compute capacity and cloud ecosystems indicate India’s intent to position itself as a global AI deployment hub, with strong spillovers into power demand, industrial real estate and telecom infrastructure.

However, equity markets reacted cautiously. On Budget day, equities traded weaker, reflecting disappointment around the sharp increase in Securities Transaction Tax (STT) on derivatives (Futures: 0.02% to 0.05%; Options: 0.1% to 0.15%) alongside the absence of immediate consumption stimulus or aggressive tax cuts. This reinforces the view that the Budget is structurally bullish but tactically neutral for equities in the near term.

In summary, Budget 2026 is not designed to excite markets today — it is designed to make India structurally stronger by 2030 and globally competitive by Viksit Bharat 2047. For long-term capital allocators, that distinction is critical.