Overview of Budget 2026
The Budget 2026 received overwhelmingly positive feedback, with descriptors like "businesslike," "calm," "collected," and even "boring." It garnered a 95% approval rating, a remarkable achievement in over three decades of budget analysis. However, it wasn't without controversy, as a contentious retrospective tax on Sovereign Gold Bonds (SGBs) emerged.
Retrospective Tax on Sovereign Gold Bonds (SGBs)
- Introduction of SGBs: Initiated in 2015-16 to curb gold imports by offering paper gold, exempting capital gains from taxes.
- New Tax Implications: From April 2026, a 12.5% long-term capital gains tax will apply due to soaring gold prices, sparking criticism for being unfair and counterproductive.
- Government's Financial Gain: The move is expected to generate only Rs 200 crore annually, a mere .005% of total tax receipts for 2025-26.
- Historical Benefits: SGBs helped stabilize the rupee by reducing physical gold imports and allowed the government to borrow at lower rates, saving significant amounts compared to market rates.
Criticism of Retrospective Taxation
- Policy Impact: Retrospective taxes are criticized for damaging investor trust and reflecting poorly on India's budget and decision-making processes.
- Call for Policy Reform: Advocacy for an open, collaborative budget preparation process, moving away from secretive colonial practices.
Positive Aspects of Budget 2026
- Policy Announcements: Income tax and GST reforms were communicated in advance, marking a shift toward transparency.
- Trade and Deregulation: Significant trade deals and deregulation efforts, aligned with the NITI Aayog report, indicate a progressive economic stance.
Challenges in Private Investment
The lack of private investment growth remains a critical concern. The share of private investment in GDP has dropped about 10 percentage points from its peak, prompting concern over the investment climate in India.
- FDI Concerns: Net Foreign Direct Investment (FDI) is declining, being barely positive and at its lowest since 1990, partly due to past retrospective tax policies.
- Investment Treaty Issues: Criticism of the 2015 Model Bilateral Investment Treaty for its stringent requirements, discouraging foreign investments.
