Budget without ‘big bang’ measures: Nomura sees capex focus as positive, disinvestment target ambitious

Nomura on Monday described Budget 2026 as mixed, noting that while it included measures to boost manufacturing, exports, capital expenditure, defense, and resilience in critical minerals, the pace of fiscal consolidation was slower than expected. The higher market borrowing requirement, it said, is likely to keep concerns around bond supply and policy transmission alive.

The brokerage viewed the disinvestment target of Rs 80,000 crore as ambitious, attributing it to optimistic asset monetisation estimates. Nomura pencilled in a more conservative Rs 40,000-50,000 crore of collections. The budget assumes Rs 2.8 lakh crore in RBI dividends, up from Rs 2.69 lakh crore in FY26, which Nomura considered reasonable.

Nomura said: “The budget assumptions of capex and revex are largely realistic, although we assume slightly lower targets owing to consolidation later in the year if revenues disappoint. Thus, we believe the fiscal deficit target of 4.3 per cent of GDP for FY27 is achievable.”

Overall, Nomura found the budget assumptions credible and estimated a fiscal impulse of 0.6 percentage points in FY27, implying a modest positive boost to growth. It expects a cyclical recovery in India, with GDP growth near trend at 7.1 per cent in FY27. While the Budget should be neutral for monetary policy, it may revive concerns about managing large bond supply at the centre and state levels.

On the policy front, Nomura highlighted initiatives including a manufacturing push for electronics components, containers, textiles, and sports goods; the establishment of a rare earth corridor; a 17 per cent increase in defense capex; and tax holidays for foreign cloud service providers using Indian data centers.

On taxes, no major changes to income tax or corporate tax rates were announced, in line with expectations. To facilitate the shift to the new tax regime, the Minimum Alternate Tax (MAT) rate will be reduced from 15 per cent to 14 per cent and made a final tax. In a move seen as negative for equity markets, the Securities Transaction Tax (STT) on futures and options was raised to curb speculation.

Indirect tax changes mainly focused on customs duty cuts for labour-intensive industries (marine, leather, textiles), nuclear power, aircraft manufacturing, clean energy, critical minerals, and personal imports.

"Apart from these, major ease of doing business changes have been announced in the customs' administration (duty deferral, single interconnected digital window, trust-based system etc.)," it said.