Bets on new economy, manufacturing, Pg1

Key Highlights:

• The Budget estimates a nominal growth rate for 2026-27, potentially translating to a real growth rate of 6-7% assuming 3-4% inflation.
• Securities Transaction Tax (STT) for futures and options has been increased, leading to a sharp drop in the BSE Sensex by 1,546 points.
• The Budget aims to attract Individual Personal Resident Outside India (PROI), increasing their investment limit in equities.
• Capital expenditure has been increased by over 10% to Rs 12.22 lakh crore, which is 4.4% of GDP, the highest in 10 years.
• The debt-GDP ratio is estimated to be 55.6% for the next year, with a target to reduce it to 50% or lower by 2030-31.
• The Budget proposes dedicated rare earth corridors to promote mining, processing, and manufacturing in mineral-rich states.
• Seven high-speed rail corridors will be developed as "growth connectors" as part of the capital expenditure push.

Detailed Insights:

• The tax growth is estimated to be just over 7%, which is lower than the nominal growth rate for the fourth consecutive year.
• The Economic Survey 2025-26 had raised concerns about drying up of foreign capital and a weakening rupee, but the Budget did not announce measures to attract FDI and FII.
• The investment limit for an individual PROI under the Portfolio Investment Scheme has been increased from 5% to 10%, with an overall investment limit increased to 24% from 10%.
• The capital expenditure for the next fiscal is higher than the net borrowings excluding small savings, indicating more asset creation than liabilities.
• Food and fertilizer subsidies are expected to be slightly lower in 2026-27 compared to the revised estimates of 2025-26, but remain high due to lack of targeted reforms.
• The Budget emphasizes job creation through skill upgrades in education, services, healthcare, and tourism sectors.
• The Budget marks a transition to the debt-GDP ratio as the fiscal anchor, targeting 50% or lower by 2030-31.

Key Concepts Involved:

• Fiscal Deficit: The difference between the government's total revenue and its total expenditure.
• GDP (Gross Domestic Product): The total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
• Capital Expenditure: Funds used by a company to acquire or upgrade physical assets such as property, buildings, or equipment.