Union Budget 2026–27: Expectations vs Reality (and what it means for business)
India’s Union Budget for FY 2026–27 (presented on February
1, 2026) landed in a high-expectation environment: slowing global demand,
tariff/geo-economic uncertainty, strong domestic capex momentum, and a middle
class hoping for tax relief. What we got is a Budget that leans hard into
long-term competitiveness (manufacturing, deep-tech, jobs, agriculture
productivity) while keeping the tax relief narrative restrained and tightening
certain market-related levies.
Below is a crisp, decision-useful comparison of what
markets broadly expected vs what the Budget delivered.
1) The big macro call: “growth with
discipline”
Expected
- Continued
fiscal consolidation (lower fiscal deficit path)
- Capex-led
growth to continue, but with some caution
- Realistic
borrowing plan to avoid bond-yield shocks
Reality
- FY27
fiscal deficit targeted at ~4.3% of GDP (continuing
consolidation).
- Record
infrastructure/capex push: ₹12.2 trillion,
up ~11.4% YoY for FY26–27.
- Higher
gross market borrowing noted at ~₹17.2 trillion,
which markets flagged as a near-term sentiment risk.
Takeaway: The Budget is
saying: “We’ll spend on productive assets, but we won’t blow up the
deficit.” Bond markets will watch execution and tax buoyancy closely.
2) Income tax: the loudest expectation… and
the quietest delivery
Expected
- Higher
standard deduction, slab tweaks, or meaningful relief (to stimulate
consumption)
- Simplification
moves aligned with the new tax architecture
Reality
- Multiple
trackers reported no major slab change in the headline sense.
- The
policy direction is clearly toward “rules + compliance + new architecture”
rather than big giveaways (with the new Income-tax framework taking center
stage in coverage).
Takeaway: If you were hoping
for a “middle-class booster rocket,” this Budget didn’t lead with that.
3) Markets & trading: STT surprise
becomes a headline
Expected
- Capital
markets reforms, rationalisation, maybe stability around trading levies
Reality
- STT
on derivatives increased (noted widely as a
market dampener for F&O volumes).
Takeaway: Long-term investors
won’t care much; high-frequency/F&O ecosystems will.
4) Manufacturing & deep-tech: this is
where the Budget “over-delivered”
Expected
- Stronger
manufacturing incentives
- Some
new-age themes: semicon, AI, electronics supply chain, GCCs
Reality
- Semiconductor
Mission 2.0 announced with ₹40,000 crore
thrust (coverage highlights this as a major pillar).
- Manufacturing
focus (biopharma, semicon, rare earth mining)
positioned as strategic growth engines amid global volatility.
Takeaway: The Budget is
clearly trying to convert India from services-first to “services +
strategic manufacturing”.
5) MSMEs & jobs: strong signalling,
multiple instruments
Expected
- Easier
credit, growth funds, employment skilling programs
- More
“formalisation + productivity” approach than pure subsidies
Reality
- ₹10,000
crore MSME Growth Fund announced.
- Employability
push via short modular skill programs designed with institutions
like ICAI/ICSI.
- A
rural employment/livelihood mission got a notable allocation in coverage.
Takeaway: This is pro-jobs,
but through institutions + funds + skilling, not one mega employment
scheme.
6) Agriculture & rural: tech + higher
allocation narrative continues
Expected
- Productivity
+ diversification + allied income focus
- Digital
stack for agriculture to scale advisory/market linkages
Reality
- Agriculture
allocation ~₹1.63 lakh crore, ~7% higher
than prior year revised estimate (as reported).
- Launch
of a multilingual AI tool for farmers (Bharat-VISTAAR) integrating
advisory packages/AgriStack direction in coverage.
- Continued
push toward high-value crops and allied sectors.
Takeaway: Rural India remains
a growth and political economy anchor—now with a stronger “AI + productivity”
layer.
7) Real estate & urban: where
expectations ran ahead of announcements
Expected
- Fresh
affordable housing triggers (PMAY/interest subsidy type momentum)
- Stronger
urban mission outlays to support Tier 2/3 housing demand
Reality (as widely reported)
- Coverage
notes no big new affordable housing headline, and indicates PMAY
Urban 2.0 allocation cut (~5.9%), with some disappointment in the
sector narrative.
Takeaway (for developers & brokers):
Watch capex-led infra corridors (which can lift micro-markets) more than
direct housing sops this year. Capex is strong; housing-specific catalysts look
softer in reported commentary.
8) Federalism & states: continuity, but
debates remain
Expected
- Higher
state share or special grants due to state-level fiscal pressure
Reality
- States’
share retained at 41% (Reuters coverage also notes
ongoing state concerns around cesses/surcharges).
Takeaway: Implementation will
still hinge on Centre–State coordination, especially for employment,
agriculture, and infrastructure delivery.
So… who “wins” and who feels the pinch?
Relative winners
- Manufacturing:
semicon/electronics ecosystem, biopharma themes
- Infrastructure
supply chain (capex continuity)
- MSMEs
(growth fund + competitiveness narrative)
- Agri
productivity + allied sectors + agri-AI enablement
Pressure pockets
- High-churn
derivatives trading ecosystem (STT hike narrative)
- Middle-class
sentiment (if they were expecting big tax relief)
- Affordable
housing sentiment (based on allocation/catalyst commentary)
© Dhananjay Parmar
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9223497891
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