For an economy plagued by multiple ailments – a daily depreciating currency, growing household debt, high unemployment and inequality, exodus of foreign capital, and distressed agriculture – the Union Budget for the financial year 2026-27 came with seemingly no panacea. In fact, given the uncertain global economic environment, the government had a great opportunity to set things in order, especially in the wake of India facing steep 50 per cent tariffs on its goods sold in the US, the country’s biggest export market. While Finance Minister Nirmala Sitharaman has once again focused on the government’s capital expenditure, hiking it to Rs 12.2 lakh crore from Rs 11.2 lakh crore last year, the Budget offers little solace to boost consumption in an economy grappling with stagnant wages and uneven demand. Leaving the income tax slabs unchanged may signal fiscal prudence, but it also reflects a missed opportunity to create more disposable income for the middle class.
The rupee’s persistent fall against the US dollar has been a major drag on the Indian economy, leading to higher import costs and foreign investors pulling out their money from the Indian capital market. This daily drop in the value of INR is taking place at a time when the US$ is itself weakening. To address this situation, the least the government could have done was to attract foreign investors, as more dollars coming into India means the rupee getting stronger. Sadly, the Budget proposed an increase in the Securities Transaction Tax (STT) on derivatives, a move seen as unprofitable for foreign investors, sending the stock markets on a downward spiral with the Sensex and Nifty falling nearly 2 per cent each. The crash eroded investors’ wealth by Rs 9.40 lakh crore in a single day.
There seems to be no plan to bridge the rising inequality gap, a huge cause of concern and something the government should have focused on. The share of government revenue from personal income tax at 21 per cent has once again overtaken that from corporate tax at 18%. This continues a decade-long trend in which India’s tax policy has increasingly favoured corporate houses. In the Budget Estimates for 2026–27, income tax collections are pegged at Rs 14.66 lakh crore, while corporation tax is estimated at Rs 12.31 lakh crore. This shift follows a steady reduction in corporate tax rates—from 30% earlier to 22% for domestic firms and 15% for new manufacturing units. At the same time, GST revenues have surged, rising from Rs 4.4 lakh crore to Rs 22.08 lakh crore over the past five years. This regressive taxation policy has greatly contributed to widening income and wealth inequality. GST increase, a tax paid by the poorest of the poor, shows how financial well-being is taken away from the economically weaker sections of society.
Equally disconcerting is the Budget’s silence on unemployment and inequality, issues that cannot be addressed by capital expenditure alone. While the government has stayed committed to fiscal consolidation, the absence of a fresh social sector thrust risks widening economic divides. The government’s allocations for social sectors, which are crucial for human development, remain modest. Health spending is budgeted at just 0.5 per cent of GDP, far below the 2.5 per cent recommended in the National Health Policy of 2017, which envisaged the Centre contributing 40 per cent of the total. Education has a budgetary allocation of Rs 1.39 lakh crore, a paltry 0.6 per cent of GDP.
The National Education Policy 2020 had called for public spending of 6 per cent of GDP on education, but the Centre’s own contribution has stagnated at around 0.4 per cent of GDP since the policy’s release, effectively shifting the burden to the states. Even after accounting for state expenditure, India’s total spending on education stands at only about 4.12 per cent of GDP. With a total allocation of Rs 1,62,671 crore for agriculture and allied activities, a 7.12 per cent increase from the revised estimate of Rs 1,51,853 crore for 2025-26, the Finance Minister unveiled a package for livestock, fisheries and high-value agriculture sectors. The government allocated Rs 350 crore for supporting high-value crops, including coconut, sandal wood, cocoa and cashew in coastal areas, agar trees in the North East, and almonds, walnuts and pine nuts in hilly regions. It is pertinent to note here that this focus on high-value crops or on organic farming that the government has been so vociferously trying to promote will most likely benefit big Indian and multi-national corporations, not the vast majority of individual farmers who are incapable of affording the certification cost, which ranges between Rs 20,000 and Rs 1,00,000, for entering high-value organic farming.
Small and medium enterprises, often described as the backbone of the economy and burdened with employing the vast masses, continue to be neglected with limited relief in terms of credit access and regulatory simplification.
Sitharaman’s record ninth Budget has failed to strike the right chords at a time when the economy was badly in need of a massive fillip.