With the GST rationalisation, the government’s net tax kitty is expected to be lower than the initial budget estimates for FY26. From the revised figure, the net tax revenue is expected to grow 7.2 per cent in FY27, with a healthy projection on direct tax collections and non-tax revenue in the form of dividends may offer much needed cushion.
The union budget seems to have taken the Economic Survey’s recommendations seriously and announced a slew of schemes for strengthening domestic manufacturing. This needs to be viewed from two angles- One there has been concern about private investments not picking pace. The second aspect, with the world turning to protectionism, it is essential to address the supply chain disruption by building capability locally. However, the challenge is that in areas like semiconductor manufacturing the industry is complex with longer gestation and execution time.
The budget has also acknowledged services as one of the key drivers of growth and has announced some tax measures. It has also provided custom duty exemptions to some key sectors including nuclear power, battery storage. Rightly, the budget in order to curb speculation has hiked the securities transaction tax in the futures and options segment of the equity market. As per the income tax department, total volume of transaction in options and futures is more than 500 times of Indian GDP (which is at Rs 300 lakh crore)
There are also some announcements for poll bound states like West Bengal and Tamil Nadu, though not big ticket ones. The budget has assured the reforms express will continue and announced a formation of a high level committee to review the functioning of the banking system.
The 16th Finance Commission recommendation to retain the vertical devolution at 41 per cent has been accepted. This may come as a disappointment for states like Tamil Nadu which were hoping for more share. Overall the government seems to have selected a cautious path amid the global uncertainties, despite a resilient domestic economy and lower inflation. One may feel there could have been more in the budget. On the one hand it looks like a disciplined budget and the other it looks like a boring one, sans any major announcements. Some of the reforms are continuous process and happens outside the budget.
Looking beyond the budget, while the European Union trade deal is sealed, one has to monitor the progress on the trade deal with the US. If it comes through, it will be a major relief.
