Capital, Capex and Clarity: What Markets Need from the Next Union Budget

As India approaches the next Union Budget, the spotlight is shifting from headline-grabbing announcements to the quality of capital allocation, policy continuity, and on-ground execution. At this stage in the growth cycle, even incremental improvements in clarity and consistency can unlock disproportionate value for capital markets and the broader economy.

Deepening Capital Markets Through Smarter Taxation

From a capital markets perspective, tax rationalisation will be a critical enabler of depth, stability, and long-term participation. Recalibrating the Securities Transaction Tax (STT) so that cash equity trades are taxed meaningfully lower than derivatives can help shift behaviour away from excessive speculation towards patient, long-term investing.

Equally important is refining the framework for buyback and dividend taxation. Taxing only the profit component of share buybacks and aligning dividend tax rates for domestic investors with those applicable to non-resident Indians would reduce distortions in capital allocation and enhance predictability for serious retail and institutional investors.

Infrastructure, Monetisation, and Inclusive Growth

On the real-economy side, infrastructure remains India’s most reliable engine for sustaining momentum. A capex outlay of around 12 lakh crores, combined with meaningful increases for railways and roads, can improve logistics efficiency, lower economy-wide costs, and crowd in private investment. The proposed National Monetisation Pipeline 2.0, with a target of 10 lakh crore over FY26–30, can support this agenda if backed by transparent valuations and timely execution rather than a narrow focus on headline targets.

Addressing structural frictions will be equally vital. Expanding inverted duty refund mechanisms to cover capital goods and services can release blocked working capital for manufacturing and infrastructure players. In the BFSI and MSME ecosystem, steps towards regulatory parity for NBFCs, a more efficient SARFAESI framework, and stronger credit guarantee coverage can improve credit flow and deepen financial inclusion.

What markets and businesses now seek is steady, execution-focused reforms that unlock capital, improve efficiency, and keep India’s growth story both sustainable and investable over the coming decade.