Budget 2026 | Capex push to have trickle-down effect; STT hike a negative: Raamdeo Agrawal

In para 130, she said, “Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India.”

This provision provides a clear visibility of tax exemption for over 20 years, and has the potential to draw significant global investment in this space. Thus, this could be like the Y2K moment for the Indian software sector in 1995.

Hu Wang, founder of Nvidia, has said that data centres are “the largest infrastructure in human history”. A data centre has a tremendous trickle-down effect-power, backup power, construction (steel and cement), air-conditioning, cables, etc.

Thus, if India indeed becomes a global hub for data centres, it will go a long way in creating jobs, kick-starting private capex and significantly contributing to overall economic growth. Yet another significant point in the budget is fiscal consolidation amid a world in turmoil. Fiscal deficit is budgeted at 4.3% of GDP, down from 4.4% in FY26 and 4.8% in FY25. The underlying nominal GDP growth assumption is a defendable 11%.

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Next comes government capex. The government’s spend on infrastructure is expected to grow in line with 11% GDP growth to ₹12.2 lakh crore. However, “grants in aid for creation of capital assets” (to states and local bodies) are expected to jump 59% to ₹4.9 lakh crore. Thus, the combined capex works out to ₹17.1 lakh crore, up a significant 22% over FY26. This too can have a meaningful trickle-down effect.
If one para is a big positive, there’s another one which has spooked the stock market. Para 140 said, “I propose to raise the STT on futures to 0.05% from present 0.02%. STT on options premium and exercise of options are both proposed to be raised to 0.15% from the present rate of 0.1% and 0.125%, respectively.” At a time when foreign portfolio investors are in an India-exit mode, this provision doesn’t help to reverse the trend. It also hurts market liquidity by deterring trading in F&Os, where margins are in any case thin.

Finally, buybacks are to be taxed in the hands of individual promoters at 30%, and in the hands of the small investors as capital gains tax (12.5% long-term and 20% short-term). What this fails to consider is that the buyback decision is taken by the promoters.

By taxing it higher, there is no incentive to declare buybacks. Even dividends attract peak tax rates for them. Thus, there is a good chance much of the profits will get retained in the company, to the detriment of minority shareholders.

In sum, a good budget overall, but it could have been better for the stock market.