The morning after

The Union Budget for FY27 has been presented, dissected, and digested.

The stock market has apparently not liked the budget, primarily because the finance minister proposed to hike the Securities Transactions tax (STT) on derivative trades.

Bond market also appears unhappy. One, it does not like the proposed high gross borrowing for FY27 (Rs17.1trn). Two, there are several voices raising questioning the credibility of this number also. It is felt that the actual number could be materially higher, if (i) disinvestment target (~RS800bn) is not met, as has been the case in past many years; (ii) 8^th pay commission payout is made within FY27 (no provision made in the budget); (iii) gold prices volatility continues and more tranches of Sovereign Gold Bonds are prematurely redeemed; (iv) revenue falls short even from the modest growth estimates.

Businesses are generally satisfied. They find the continued efforts to promote trust-based taxation; duty concessions for several capital goods, chemicals and medicines; 20 year tax concession for certain data centers; and proposal to initiate several new mega infra projects (East-West freight corridor, 7 high speed rail corridors; waterways) and tax incentives/clarity for data centers, GCC etc. positive for sustained growth.

Economists have given mixed reactions. They have commended the fiscal discipline, lower subsidies, and higher capex; but criticized poor execution by several departments and ministries (FY26RE capex much lower than FY26BE) and poor allocation growth for critical areas like education etc.

Politicians are expectedly divided on political lines. NDA supporters have commended the budget proposal as visionary, progressive, growth oriented and good for all sections of the society. Those in opposition have criticized the budget as a wasted opportunity, uninspiring for investors, unfriendly for middle classes, farmers and poor.

Common people have criticized the budget as harsh, as has been the case always. They are disappointed that their “reasonable” expectations of lower taxes, more subsidies/cash payout, better civic amenities, lower lending rates, higher deposit rates, etc. were not addressed by the finance minister.

Insofar as I am concerned, I liked the budget for its business-like approach, without much political rhetoric. It gives comfort that at least the government is aware of the serious challenges faced by the country (skill shortage, poor employment velocity of growth, changing globalization dynamics, need to attract FDI, low risk appetite of private entrepreneurs, trust deficit, counterproductive populism, etc.); and the areas where the real opportunities lie.

However, it does take away the concerns arising from persistent and extremely poor execution, obdurate denial to admit mistakes; exponentially rising corruption and inefficiencies, and criminal waste of scarce resources on wasteful expenditure like political promotions.

While the attention of markets was focused on budget presentation, a mini crisis of sorts has developed in the precious metal markets. The prices of gold and silver have turned highly volatile and fallen *% and 30% respectively in the past three trading sessions.

Several readers have asked my views on the recent trends in the precious metal prices, persistent FII selling and the likely impact of STT hike on stock market volumes. I will address these questions tomorrow.