By: Udaibir Das
This article originally appeared in The Tribune on February 5, 2026.
The Budget 2026-27 contains an insight that most commentary has missed. It treats the macroeconomy and the financial system as a single engine, not two disconnected silos. High public investment, now Rs 12.2 lakh crore in capital expenditure, is designed to crowd in private capital. That raises demand for long-term finance. Meeting it requires deeper bond markets.
Deeper markets require functioning market-making mechanisms that enable institutions to buy and sell securities, allowing investors to trade them. Market-making, in turn, requires institutional redesign. That chain of causation is what this Budget begins to construct. It marks India's gradual shift from reform-by-announcement to reform-by-institution-building.
The evidence is in the detail. For the first time in years, the Budget addresses not just who issues debt but also whether it actually trades afterwards. A new market-making framework for corporate bonds, accompanied by instruments that let investors take positions on bond performance without holding the bonds, marks a departure from India's longstanding focus on issuance while ignoring liquidity.
This is the bond-deepening step in the chain. The Budget further extends this by incentivising large municipal bond issuances to bring city-level borrowing into the formal capital market. Success depends on whether urban local bodies can meet the disclosure and fiscal standards that credible bond markets demand.
Mandating a single digital platform for all government purchases from MSMEs, with the ability to package those receivables into tradeable securities, attempts to scale small-business finance into a national system. If it works, MSME receivables financing volumes should increase measurably within 18 months, a hypothesis we can test.
GIFT City, under construction in Gandhinagar, addresses a different link in the chain: where financial risk gets managed. Doubling the IFSC tax holiday to 20 years, alongside liberalised foreign investment rules, is a direct bid to compete with Singapore, Dubai and Hong Kong — and to build institutional plumbing that portfolio investors require.
Private markets, however, priced in a different assessment: Sensex fell over 1,500 points on Budget day; foreign portfolio investors, who withdrew nearly $19 billion from Indian equities in 2025, found nothing to reverse that trend, and Moody's characterised the Budget as "tactical" rather than a "breakthrough."
The trigger was a steep increase in Securities Transaction Tax on derivatives, with the rate on futures more than doubling. GIFT City is exempt from this levy. That differential risks redirecting speculative volume offshore rather than deterring it, precisely the opposite of what was intended. The institutional ambition is real. The transactional signals undercut it.
The same logic of institution-building shapes the Budget's approach to gender. The introduction of SHE Marts, community-owned retail outlets managed by women's self-help group federations, moves policy from credit-linked livelihoods to enterprise ownership.
The She-Mark badge and a gender budget of approximately Rs 5 lakh crore reinforce the direction. India is beginning to treat women not as beneficiaries but as economic actors whose participation shapes aggregate growth.
The architecture remains incomplete, childcare systems are weak, and pathways from self-help groups to scalable enterprises remain thin, but the shift from beneficiary to economic agent, if sustained, changes how gender enters India's growth equation.
It extends to climate, too, though here the institutional approach is hardest to see. There is no single dramatic green allocation and the criticism is understandable. But it is wrong. Climate transition is built into the financial system. A Rs 20,000-crore CCUS fund targets decarbonisation in steel, cement and refining — the hard-to-abate sectors that dominate industrial emissions.
Customs duty exemptions for nuclear power imports have been extended to 2035, while battery storage manufacturing receives duty relief designed to lower costs across the solar-plus-storage chain.
An enhanced Rs 22,000 crore allocation under PM Surya Ghar accelerates household solar adoption and the restructuring of state-run entities, PFC and REC, is designed to improve credit flow for renewable energy projects. This is climate policy by institutional design. It will not satisfy those for a dedicated green budget line, but it may prove durable because it works through the financial system rather than alongside it.
I would argue that this architectural ambition, building a chain from public investment through deeper bond markets to a yield curve that lowers the cost of borrowing for every private firm, is the Budget's most important contribution. But it will falter without changes to the budget process itself.
The Economic Survey offers rich analytics, yet its relationship to the Budget remains opaque, a diagnostic whose prescriptions the Budget neither explicitly adopts nor explains its departures from.
If the Survey is to be more than an intellectual exercise, the Budget should engage directly with it. Nor is there any mechanism to track what becomes of past announcements. Every Budget should table an implementation report on earlier initiatives that are operational, stalled and when results might be expected. The credibility of new commitments depends on evidence that old ones are being honoured.
Most urgently, the government needs to rethink how it communicates economic policy. This year, three primary documents were released within days: the 16th Finance Commission Report, Economic Survey and Budget.
A post-Budget press conference no longer suffices for an India that commands the attention of global market participants, academics and policy commentators. India’s policy choices reverberate beyond its borders. A matching dissemination effort is needed.
Udaibir Das is a Visiting Professor at the National Council of Applied Economic Research, a Senior Non-Resident Adviser at the Bank of England, a Senior Adviser of the International Forum for Sovereign Wealth Funds, and a Distinguished Fellow at the Observer Research Foundation America.