The government still predicts a 7 percent growth year for the FY26-27 period. It offers both an optimistic outlook at an uncertain time period, though one that still falls below its own lofty goals. Today, we explain more.
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Macro
New Delhi's record $187 billion (âš17.2 trillion) of borrowing pushes yields to 6.78 percent. Traders are bracing for a 7 percent rise with the Budget requiring an 18 percent increase y-o-y in federal debt issuance. This will lead to the RBI increasing their bond purchases, something they have already been doing, to make sure borrowing costs do not rise too far. Â
Equities
Major players in pharma like Sun Pharma and Biocon jumped 3-4 percent after Budget announcements. The government is setting aside $1.1 billion (âš100.1 billion) over the next 5 years to boost the production for biologics and biosimilar drugs since more Indians are diagnosed with non-communicable diseases including diabetes and cancer.
Textile companies Raymond and Trident rose over 8 percent on US tariff reductions. Plans to set up âmega textile parksâ in coordination with the US are seen as a bullish move.Â
Multiple high-tech Indian companies rose on news that the Budget had a $4.3 billion (âš391.3 billion) outlay for electronic components manufacturing. This will continue to propel an industry which has gotten Apple to move 25 percent of all iPhone production to India.Â
Shipping companies like Shipping Corp and Essar surged over 5 percent from new incentives.A new ship-repair ecosystem and incentives for seaplanes in the annual budget will boost profits while new transit corridors will increase route access.
Alts
The securities tax on equity futures will rise from 0.05 percent from 0.02 percent while the tax on options premium would rise to 0.15 percent. This continues a government move to curb speculative trading though equity markets reacted poorly by dropping 2 percent.
The government is seeking bids to build 10 new heavy pressure water nuclear reactors. The bulk format is intended to improve the governmentâs negotiating capacity and bring down prices. The goal of building 100 GW by 2047 would require an 11x rise from now and $211 billion (âš19.2 trillion) of investments.Â
Foreigners may soon be able to own 49 percent in state-run banks to increase credit-to-GDP.Right now, the ratio is at 56 percent but a 150 percent credit ratio would allow for efficient capital deployment. Foreign capital in large banks would let them issue larger loans than currently possible.
Policy
The Modi government is slowly achieving fiscal consolidation with only a 4.3 percent fiscal deficit this year. The issue with spending is reduction in federal and state capex which is dropping to 5 percent growth this upcoming year compared to 10 percent last year. JPM says that consolidation will cause public capex to fall, requiring private capex to rise. Â
Sitharaman's Budget was full of 'Trump-proofing' the economy. Support for export industries like textiles, leather, footwear, and marine products was evident; new outlays for electronics and an 18 percent rise in defense spending is also Trump-proofing the military.Â
Pakistan is not allowing its cricket team to play India in the t20 World Cup.They will play other nations and will continue to play their matches hosted in India against other teams.
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Indian Finance Minister Sitharaman
The Government Predicts Growth at 7 percent This Year
The government still predicts a 7 percent growth year for the FY26-27 period. It offers both an optimistic outlook at an uncertain time period, though one that still falls below its own lofty goals.Â
A recent Economic Survey by the Ministry of Finance predicted 6.8 percent to 7.2 percent which is slightly more bullish than most economists. Principally, the IMF believes the new FY will see growth at 6.4 percent, still weighed down by high tariffs. The current year of 2026 (from Indiaâs perspective) is even more bullish with an expansion of 7.4 percent driven by domestic consumption and investments. The survey believes that the cumulative impact of reforms will lift growth potential starting this year. For that reason it is bullish on steady growth even with some caution and uncertainty.
While the rate falls below the 8.7 percent required for developed status by 2047, Indiaâs growth is set to outpace all other major economies despite major tensions with the US. Modi is reducing the impact with the aforementioned reforms. This includes GST cuts and new labor codes which were long-sought after by employees and small businesses alike. New investment options in the insurance and nuclear industry also heighten capital inflows. There also have been 4 free trade agreements signed since 25 percent tariffs were first assigned by the US back in May. The FTAs include Oman and New Zealand and importantly the UK and the EU.Â
Economic advisors see the rate even rising to 7.5 percent to 8 percent with even more ambitious reforms and bringing down the costs of manufacturing for all firms, particularly international. Ambitious reforms include export policies for agriculture. India could reach $100 billion (âš9.2 trillion) in exports each year of agricultural, marine, and beverage products within just 4 years according to the governmentâs own survey. The internal growth factors already exist: inflation is low, balance sheets are healthy, and consumption across all levels remains resilient.
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Written by Yash Tibrewal. Edited by Shreyas Sinha.
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Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.