Speaking to ET Now, Aiyar said expectations of tougher decisions were not met, especially considering the stage of the government’s election cycle.

“It is an unremarkable budget. Perhaps you may say that is not putting it strongly enough, but there were people who were expecting different kinds of things. Mind you, in terms of the election cycle, the third Budget that a government presents out of five is usually one for taking tough decisions because you do not want to have tough budgets in the last or second last year. So there was an expectation that there would be tough decisions and major changes,” Aiyar said.

He added that instead of simplification, the budget introduced numerous small changes, increasing complexity.

“This is a very cautious budget with very little major change and thousands and thousands of niggling small little changes, which if you ask me, go against the mantra of simplification. Instead of simplification, we have a lot of complication.”

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On fiscal consolidation, Aiyar said the reduction in fiscal deficit was marginal and lacked ambition.
“The fiscal deficit is down from 4.4% to 4.3%, just about treading water. Again, very marginal, cautious, not doing anything dramatic. The direction may be right, but the amount that you are actually doing in terms of consolidation is extremely small, not what I would have expected.”He also pointed to what he sees as discouragement of share buybacks and limited tax benefits.

“It would appear that there is a discouragement of buybacks of shares. Okay, that will be applicable to some of them. Down from 15% to 14%, a small little benefit to some people. But on the big picture, fundamentally there is very little change in an unremarkable budget.”

Aiyar said the government appears to be prioritising stability over bold policy shifts, given India’s strong growth performance amid global headwinds.

“They seem to say, look, we are already doing 7% growth and there are a large number of headwinds globally, so let us not try anything exciting and let us slowly and cautiously consolidate and have a budget that does not see any dramatic changes.”

However, he expressed disappointment that major structural reforms, particularly in fertiliser subsidies, were once again avoided.

“This was a good year to do stiff things like steps towards abolishing the fertiliser subsidy, especially on urea. This is one really big area still crying out for reform and nobody seems to have the guts to call this particular one. I would say it is a wasted year as far as my feelings are concerned.”

On sector-specific announcements for MSMEs, biotechnology, and other industries, Aiyar said the measures were politically understandable but economically modest.

“From a point of view of political economy, it is very necessary for a finance minister to be seen giving something to 100 different sectors. But let us not pretend that small little pushes in these 100 little sectors are going to make a very significant or long-term change in their conditions.”

He noted that while the absence of freebies is positive, the overall impact of sectoral sops is limited.

“There are small little things for a large number of different sectors, but nothing I would say that will dramatically push any one sector.”

Aiyar also flagged growing complexity due to multiple sector-specific tweaks.

“We are moving away from simplification to complication because there are so many separate little, little, little changes for each sector and within each sector. I would have liked to see more simplification rather than the complication.”

Summing up, Aiyar characterised the budget as one driven by caution and confidence in the existing growth trajectory, rather than a push for transformative reform.

“You could call it a budget from a government that believes that it is doing such a good job that it really does not need to do very much more.”

The government’s latest move to sharply raise the Securities Transaction Tax (STT) on derivatives has sent a clear and decisive message to futures and options traders, market participants said, with equity markets reacting negatively to the development.

Swaminathan Aiyar said he was not surprised by the move, noting that there has long been concern in India about the risks associated with excessive leverage in futures and options trading.

“I am not surprised, but there is the notion… I mean, there is still in India considerable worries about whether our futures and options would be encouraging unhealthy kinds of leverage. They do encourage leverage of a very large amount and they say that to the extent that… I do not think the market will collapse merely because you have increased STT.”
However, Aiyar said the tax hike clearly reflects the government’s discomfort with rapidly expanding derivatives activity.

“But yes, the government is sending out a signal that this is not a sector where we are very happy about increasing activity. The government would rather have it on just futures and bonds rather than get on to options and futures, and that, I think, is very clear. And I have no objection to it at this point.”

He also pointed out that derivatives trading volumes in India remain relatively small compared to global standards, while concerns around potential market manipulation continue to persist.

“The trading volumes there are so relatively small by international standards, that is, manipulations that people worry about is possible from time to time.”
According to Aiyar, the broader policy direction suggests a preference for strengthening traditional capital markets over speculative leveraged activity.

“So, the future of the markets, as I said, the government is more or less saying let us not emphasise futures and options, let us just emphasise the bonds and the equities.”