File picture: Nirmala Sitharaman with her team ahead of the Budget presentation

India unveiled a relatively cautious Budget on Sunday, focusing on economic stability in the face of rising global risks.

Finance Minister Nirmala Sitharaman boosted spending on manufacturing and infrastructure projects while keeping the government’s fiscal deficit and debt under control. There were no big-bang announcements to spur the economy this time around, unlike in previous years when she cut taxes and eased restrictions for foreign investors.

Stocks slumped after Sitharaman hiked taxes on some equity transactions and announced the government would borrow more than the market had expected in the coming fiscal year. Even so, analysts saw the budget as providing a measure of predictability that investors needed in uncertain times.

“In a year marked by global trade volatility and aggressive US tariffs, the government’s adherence to fiscal consolidation — aiming for a deficit glide path near 4% — is the ‘stability premium’ foreign investors were looking for,” said Vaibhav Mittal, a partner at Khaitan & Co. By avoiding populist excesses and focusing on “fiscal prudence and monetary stability,” the Budget provides the predictability required to bolster the rupee.

India’s economy, among the fastest-growing in the world, is facing a more uncertain outlook because of global risks stemming from high US tariffs. President Donald Trump’s 50 per cent tariffs on Indian goods have curbed exports from the country’s biggest market, widened the trade deficit and caused the rupee to slump to a record low. 

Prime Minister Narendra Modi has called for more self-reliance, boosting investment in manufacturing and undertaking reforms like tax changes and cutting red tape to lure foreign businesses to the country. The government has also rushed to clinch trade agreements with other regions, including a major deal with the European Union last week, to offset the US threat.

“Our first duty is to accelerate and sustain economic growth by enhancing productivity and competitiveness and building resilience to volatile global dynamics,” Sitharaman told lawmakers in New Delhi on Sunday.

Sitharaman said the Budget deficit will ease to 4.3 per cent of gross domestic product in the fiscal year beginning April 1, from an estimated 4.4 per cent in the current year. Government debt will be brought down to 55.6 per cent from 56.1 per cent, respectively, she said.

The finance minister, who took office in 2019, has pledged to steadily lower the deficit over time after it climbed above 9 per cent of GDP during the pandemic. That fiscal path has led to a gradual improvement in India’s credit rating. 

Moody’s Ratings doesn’t see a “very large degree of fiscal consolidation,” its senior vice president Christian de Guzman said in a note after the Budget speech. “The pace of fiscal consolidation has slowed relative to previous years.” Moody’s assesses India at the lowest rung of investment grade, with a stable outlook.

Sitharaman highlighted several manufacturing initiatives, including for critical minerals, electronics manufacturing, pharmaceuticals and others. She also focused on measures to promote small businesses and build roads, railways, airports, ports, and logistics infrastructure.

Opposition parties said the Budget failed to address key issues such as job creation, faster economic growth and improvements in living standards for India’s 1.4 billion people. They plan to make it a central issue in key state elections scheduled later this year.

“Our verdict is that the Budget speech and the Budget failed the test of economic strategy or economic statesmanship,” said Palaniappan Chidambaram, former finance minister and Congress party leader at a press conference. “It is certainly not a bold exercise in fiscal prudence and fiscal consolidation.”

The government said last week it expects the economy to expand 6.8% to 7.2% in the coming fiscal year, lower than the current year’s 7.4%. Economists surveyed by Bloomberg News predict growth of 6.6%.

“The Budget was largely non-eventful, which is okay, because it doesn’t disturb the macro stability of the economy,” said Madhavi Arora, an economist with Emkay Global Financial Services Ltd. 

Other key highlights of the Budget:

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Published on February 2, 2026