Budget 2026, presented by Finance Minister Nirmala Sitharaman on Sunday, February 1, 2026, has elicited a range of reactions, from cautious optimism to outright disappointment. The market's initial response was turbulent, particularly to the proposed increase in Securities Transaction Tax (STT) on derivatives trading. However, a closer examination reveals a budget focused on long-term structural gains, with an emphasis on infrastructure, manufacturing, and technology, balanced against fiscal prudence.
The immediate market reaction to the STT hike was sharply negative. Stocks of exchanges and brokerages plummeted, with some experiencing declines of up to 10% as investors anticipated a potential slowdown in trading volumes. The Sensex and Nifty also crashed over 3% from the day's high following the announcement. The increase in STT on futures and options is seen as a move to curb excessive speculation and discourage frequent trading in the derivatives market, where a large percentage of retail traders reportedly lose money.
Beyond the market turbulence, Budget 2026 underscores the government's commitment to economic growth and fiscal consolidation. P. Ravichandran of the Confederation of Indian Industry (CII) characterized the budget in a single word: "growth". The fiscal deficit is projected to decrease to 4.3% of GDP in BE 2026-27, reflecting a commitment to fiscal discipline. The debt-to-GDP ratio is also expected to decline, freeing up resources for priority sector expenditure.
Infrastructure development remains a central theme, with a planned capital expenditure increase to ₹12.2 lakh crore for FY27. This investment aims to improve road quality, enhance mobility ecosystems and develop city-based economic regions with high-speed rail links. The budget also includes provisions for new freight corridors, the addition of national waterways, and a coastal cargo promotion scheme.
Manufacturing received a significant boost with the announcement of support for semiconductor fabrication (ISM 2.0), electronics components, biopharma, construction equipment, sports goods, and rare earth magnets. The government aims to revive 200 legacy industrial clusters and establish dedicated chemical parks and container manufacturing units. These measures are intended to strengthen domestic manufacturing, reduce import dependence, and create employment opportunities.
The budget also acknowledges the growing importance of Artificial Intelligence (AI) and digital infrastructure. Proposals include establishing 15,000 AI labs in schools and 10,000 technology fellowships at premier institutions. A high-powered panel will also be set up to assess the impact of AI and emerging technologies on jobs and skills.
However, not all reactions were positive. Opposition Leader Rahul Gandhi criticized the budget as "blind to India's real crises," citing concerns about youth unemployment, falling manufacturing, and farmer distress. CREDAI, the realtors' apex body, expressed disappointment that the budget lacked incentives for affordable housing. Kumar Rajagopalan, CEO of the Retailers Association of India, suggested that the budget is not designed to stimulate short-term consumption but focuses on shaping the operating environment for retail through fiscal consolidation and infrastructure investment.
In conclusion, Budget 2026 presents a mixed bag. While the increase in STT triggered a negative market reaction, the budget's broader focus on infrastructure, manufacturing, and fiscal consolidation signals a commitment to long-term economic growth. Whether these measures will translate into broad-based income gains and address the concerns of various sectors remains to be seen. The Economic Survey 2025-26 forecasts a positive domestic growth outlook but warns of potential global economic crises, highlighting the need for continued vigilance and adaptability in the face of uncertainty.