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2 Feb 2026·Source: The Indian Express
3 min
EconomyNEWS

Budget 2026: Focus on new economy, manufacturing, tax changes impact markets

Budget 2026 bets on new economy, manufacturing; transaction tax impacts markets.

Budget 2026: Focus on new economy, manufacturing, tax changes impact markets

Photo by Towfiqu barbhuiya

The Budget 2026 focused on the new economy and manufacturing. However, it did not push for foreign capital. The transaction tax on speculation in F&O was hiked, leading to a fall in Sensex by 1.9%. Volumes were already down. The budget addressed US demands and backs vulnerable sectors.

Key Facts

1.

Sensex fell: 1.9% due to transaction tax hike

2.

Focus: New economy and manufacturing

UPSC Exam Angles

1.

GS Paper 3: Indian Economy - Resource Mobilization, Growth, Development and Employment

2.

Connects to syllabus topics like fiscal policy, industrial policy, and economic reforms

3.

Potential question types: Statement-based, analytical questions on economic policies

Visual Insights

Sensex Impact After Budget 2026

Shows the impact on Sensex due to the transaction tax hike on speculation in F&O.

Sensex Change
-1.9%

Indicates market reaction to the budget announcement, particularly the increased transaction tax.

More Information

Background

The Indian economy has undergone significant transformations since independence. Initially, it was characterized by a mixed economy with a strong emphasis on public sector involvement. The Industrial Policy Resolution of 1956 guided this phase, prioritizing heavy industries and infrastructure development. However, this approach also led to inefficiencies and slow growth. The economic reforms of 1991 marked a paradigm shift, ushering in an era of liberalization, privatization, and globalization. The LPG reforms aimed to dismantle the license raj, encourage foreign investment, and promote competition. These reforms led to higher economic growth and increased integration with the global economy. The Balance of Payments crisis of 1991 was a key trigger for these reforms. Fiscal policy in India is governed by the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which aims to ensure fiscal discipline and reduce the fiscal deficit. The Act sets targets for fiscal indicators and promotes transparency in government finances. However, the FRBM Act has been amended several times to accommodate changing economic conditions and policy priorities. The concept of fiscal deficit is central to understanding government finances.

Latest Developments

The Indian economy is currently focusing on promoting the new economy and manufacturing sectors. Initiatives like Make in India and Production Linked Incentive (PLI) scheme are aimed at boosting domestic manufacturing and attracting foreign investment. These initiatives seek to create jobs and enhance India's competitiveness in the global market. Recent policy changes have also focused on addressing the demands of key trading partners like the US and supporting vulnerable sectors. The government is actively engaging in trade negotiations and implementing measures to promote exports and reduce trade imbalances. The Atmanirbhar Bharat Abhiyan aims to promote self-reliance and reduce dependence on imports. Looking ahead, the Indian economy is expected to continue its growth trajectory, driven by factors such as increasing domestic consumption, infrastructure development, and technological advancements. The government has set ambitious targets for economic growth and is implementing policies to achieve these goals. The role of NITI Aayog is crucial in shaping the future economic policies of India.

Frequently Asked Questions

1. What are the key facts about Budget 2026 that are important for the Prelims exam?

For the Prelims exam, remember these key facts about Budget 2026: The budget focused on the new economy and manufacturing sectors. The Sensex fell by 1.9% due to a hike in the transaction tax on speculation in F&O.

2. What is the 'new economy' mentioned in the context of Budget 2026, and why is it important?

The 'new economy' refers to sectors driven by technology, innovation, and knowledge. It is important because it can lead to higher growth, job creation, and global competitiveness. The budget's focus on this sector indicates a forward-looking approach.

3. How did the increase in transaction tax impact the stock market, specifically the Sensex?

The increase in transaction tax on speculation in F&O led to a 1.9% fall in the Sensex. This indicates that such tax changes can have an immediate negative impact on market sentiment and investment activity.

4. What is the significance of Budget 2026 focusing on manufacturing, and how does it relate to initiatives like 'Make in India'?

The focus on manufacturing aligns with initiatives like 'Make in India' and the PLI scheme. It aims to boost domestic production, attract investment, create jobs, and enhance India's position in the global supply chain. This focus is crucial for long-term economic growth and self-reliance.

5. What are the potential pros and cons of the Budget 2026's focus on the new economy and manufacturing?

Pros include increased innovation, job creation, and economic growth. Cons might include neglecting traditional sectors, potential job displacement due to automation, and the risk of unequal distribution of benefits if the new economy is not inclusive.

6. As per the article, what recent developments have focused on promoting the new economy and manufacturing sectors?

Recent developments include initiatives like 'Make in India' and the Production Linked Incentive (PLI) scheme. These are aimed at boosting domestic manufacturing and attracting foreign investment.

7. What impact does the Budget 2026 have on common citizens?

The budget's focus on the new economy and manufacturing could lead to more job opportunities and higher incomes for some citizens. However, the impact might vary depending on their skills and the sectors they work in. The increase in transaction tax may not directly affect most citizens.

8. What are the important dates and figures to remember related to Budget 2026 for the UPSC exam?

As per the provided information, the key figure to remember is the 1.9% fall in Sensex due to the transaction tax hike. There are no specific dates mentioned in the provided context.

9. Why is Budget 2026 in the news recently?

Budget 2026 is in the news because of its focus on the new economy and manufacturing, the hike in transaction tax impacting the stock market, and its alignment with initiatives like 'Make in India'.

10. What reforms are needed to ensure the benefits of Budget 2026 reach vulnerable sectors?

Based on the information, the budget backs vulnerable sectors. To ensure the benefits reach them, targeted programs, skill development initiatives, and financial assistance may be needed. More information is needed to provide specific reforms.

Practice Questions (MCQs)

1. With reference to the Budget 2026 and its impact on the Indian stock market, consider the following statements: 1. The Budget 2026 emphasized the new economy and manufacturing sectors. 2. The transaction tax on speculation in Futures and Options (F&O) was decreased, leading to a fall in Sensex. 3. The Budget 2026 did not prioritize attracting foreign capital. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.1 and 3 only
  • C.2 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: B

Statement 1 is CORRECT: The Budget 2026 focused on the new economy and manufacturing sectors, as explicitly mentioned in the summary. Statement 2 is INCORRECT: The transaction tax on speculation in F&O was HIKE, not decreased, leading to a fall in Sensex by 1.9%. Statement 3 is CORRECT: The Budget 2026 did not push for foreign capital, as stated in the summary. Therefore, only statements 1 and 3 are correct.

2. Consider the following statements regarding the impact of the Budget 2026 on the stock market: 1. Following the Budget 2026 announcement, Sensex fell by approximately 1.9%. 2. The increase in transaction tax on speculation in F&O contributed to the Sensex decline. 3. The Budget 2026 primarily focused on attracting foreign capital to boost the stock market. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is CORRECT: The summary states that Sensex fell by approximately 1.9% following the budget. Statement 2 is CORRECT: The hike in transaction tax on speculation in F&O led to the fall in Sensex. Statement 3 is INCORRECT: The budget did not prioritize attracting foreign capital, as mentioned in the summary. Therefore, only statements 1 and 2 are correct.

3. Which of the following sectors did the Budget 2026 explicitly aim to support, according to the provided information?

  • A.Information Technology
  • B.Renewable Energy
  • C.Vulnerable Sectors
  • D.Real Estate
Show Answer

Answer: C

The summary explicitly mentions that the Budget 2026 backs vulnerable sectors. Therefore, option C is the correct answer. The other options are not directly mentioned in the provided information.

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