Familiar Themes, But Fresh Challenges For Budget

Nirmala Sitharaman will present her eighth consecutive Budget—an achievement in itself. That she is also India’s first woman finance minister to do so only adds to the significance. More than gender, though, this Budget is about continuity—both in its presenter and its likely themes. The only difference this time? A Saturday session and a special market trading window.  

For Indian stock markets, which have been undergoing a sharp valuation correction for months, the Budget is a crucial event. But before that, investors will focus on key global and domestic signals. The US Federal Reserve's interest rate decision on Jan 30 will set the global tone. The next day, India’s fiscal deficit figures, infrastructure output data, and the RBI’s Monetary & Credit Information Review will offer key macroeconomic insights. A week after the Budget, the RBI will announce its own interest rate decision on Feb 7.  

Balancing Economics and Politics  

Budgets are built on expectations, and the finance minister must walk a tightrope, balancing economics and politics. The ground reality, however, is rarely balanced. Consumer demand remains weak, private capital expenditure is sluggish, and falling equity markets have dampened sentiment. Adding to the uncertainty is the US, where higher tariffs could hit Indian exports.  

The fiscal deficit target may be met, but likely due to lower tax receipts and constrained government spending rather than revenue growth. This is Sitharaman’s challenge: stimulate economic activity through higher public investment in infrastructure and social welfare while also managing tax rates to revive demand. Tax rationalisation—particularly for TDS and TCS rates—is expected to simplify compliance.  

The “Usual Suspects” of Every Budget  

For markets, the real question is simple: "What should we buy?" Every Budget has its "usual suspects"—sectors that inevitably receive a boost. These have been safe bets in previous Budgets and are likely to remain so.  

- Rural and Social Spending: A bigger outlay for MGNREGA and other social welfare schemes means more money in rural India. Higher allocations for agriculture, rural credit, and irrigation should benefit FMCG, consumer durables, pump and pipe makers, drip irrigation, seeds, and fertiliser companies.  

- Infrastructure Push: Increased spending on roads, airports, ports, and urban infra will benefit capital goods, construction, and transport-linked sectors.  

- Education & Skill Development: More funds for education, vocational training, and women’s skill programmes will support companies in the education and skilling sectors.  

- Renewables & EVs: Companies in renewable energy, EV manufacturing, EV battery production, and power generation & distribution are set to gain.  

- Defence: A higher defence budget and Make in India push will keep defence stocks rallying.  

- Export Incentives: A push to boost exports is also likely.  

The themes are clear. The Budget will likely prioritise farmers, agriculture, and rural India, while urban middle-class taxpayers may receive only token benefits.  

Expectations are high. Beyond the politics, people need jobs, incomes, and economic stability. That is what a government is elected to deliver. Will this Budget live up to those expectations? Or is that just wishful thinking?