“Government is in a reform express phase and reform is not just revenue-centric, but citizen-centric reforms should be brought in all aspects of society, and not just in the economy. Laws are to be for the citizens' convenience, not to harass. Ease of life and ease of doing business are top priorities of the government.”
-PM Narendra Modi
The Union Budget for the financial year (FY) 26–27 comes at a decisive moment. After eight consecutive Budgets, Union finance minister (FM) Nirmala Sitharaman enters her ninth with a record of fiscal discipline, steady capital expenditure (capex) growth, benign macroeconomic factors and relative political stability and consensus on macroeconomic direction. Despite occasional friction over tax devolution, her Budgets have avoided major criticism from opposition-ruled states—an achievement in itself. In this background, the expectation and clarion call of the PM referred to above is achievable provided the ensuing Budget is made transformative in character, intent, practical and result-oriented.
Yet the question remains: Can the coming Budget fix the structural and administrative loopholes that prevent India from realising the full benefit of its economic progress?
Fiscal prudence, inflation control and capital spending have undeniably strengthened India’s foundation. The push toward an advanced economy by 2047 has political commitment and administrative momentum. But on the ground, ordinary citizens still feel the burden of high living costs, uneven data, and a tax structure that often overwhelms rather than empowers. The disconnect between policy intent and lived experience remains wide.
Rationalising Taxes: The Most Urgent Reform
India today has too many taxes, too many levies and too many names for similar burdens—direct taxes, indirect taxes, GST, tolls, educational cesses, surcharges, service fees, commissions, and charges of various kinds. Every layer adds to the cost of production, cost of living and public frustration.
This is not about avoiding taxes. Indians understand that the government needs resources for development. What they resent is the feeling of tax harassment, complexity and mental fatigue created by the sheer number of levies.
The FY26–27 Budget must aim for:
• Fewer taxes, clearer taxes, simpler taxes
• A unified logic instead of fragmented collections
• Minimal overlap between Central, state and local levies
• Predictable rules that encourage voluntary compliance
If goods and services tax (GST) rationalisation could dramatically reduce disputes and improve compliance, a similar approach across all taxes can transform public perception and strengthen revenue integrity.
Capital Gains, Buyback Taxation and Market Participation
India’s capital markets depend on long-term retail investors for depth and stability. Yet existing policies often penalise them.
Buyback Taxation Needs a Relook
Investors who hold shares through market cycles sacrifice liquidity and often real returns after adjusting for inflation. To tax buybacks as capital gains—on top of taxing dividends in the hands of individuals—undermines the very behaviour that equity markets depend on. Reviewing and removing this levy would boost participation and send a message of policy stability.
Real Estate Capital Gains Also Need Reform
Linking property gains to income-tax slabs is outdated. A separate, inflation-adjusted capital gains system—levied at the time of transaction, routed through banks and registrars, with strict KYC (know-your-customer)—will reduce evasion,
eliminate cash dealings and bring transparency without punishing genuine sellers.
Securities Transaction Tax (STT)
STT is non-inflationary and can be calibrated intelligently. A differentiated rate for buy and sell trades could help reduce excessive volatility, discourage speculation and reinforce market stability.
Capital markets thrive when taxation rewards patience and transparency—not turnover and loopholes. This Budget can correct that imbalance.
Administration, Data Integrity and Leakages: India’s Blind Spot
India’s biggest gap is not policy ambition but administrative capacity. Weak data and incomplete tracking undermine even the best-designed fiscal measures.
Employment in metros and semi-urban centres has grown sharply—security services, domestic work, drivers, retail vendors, catering, teachers, small entrepreneurs, priests and maintenance workers. These workers keep the economy running, yet their contribution barely shows in official data. When data is inaccurate, policy becomes distorted.
Even the IMF has raised concerns and gave a C grade for its national accounts citing methodical issues like an outdated 2011-12 base year, single deflation methods and unexplained discrepancies which 'somewhat hamper surveillance'.
The Budget must therefore push for:
• Real-time data integration across ministries
• Stronger administrative capacity to detect leakages
• AI-based verification of employment, income flows, and service output in particular
• A much clearer picture of the informal economy and evasion of taxes.
• Seamless linking of subsidies, welfare, and productivity data
If India can track its workforce and income flows more accurately, it can eliminate black money far more effectively than by periodic crackdowns.
Land, Labour and Legal Reforms: Completing the Foundation
Labour reforms have been announced. But without complementary land reforms and legal system reforms, India cannot build a truly modern economic framework.
A functional judicial system, clear land records and predictable regulation are essential for investment, manufacturing and ease of living. Budget 2026–27 should continue nudging states toward these long-pending structural reforms.
Once these three pillars converge, annual Budgets will truly become exercises in fine-tuning rather than firefighting.
The Emotional and Civic Dimension of Welfare
Economic policy cannot ignore sentiment. People care about dignity, peace and a basic sense of fairness. They want stable prices, accessible public spaces, functioning civic infrastructure and freedom from harassment.
Inflation—especially food inflation—hits the poorest hardest. Strengthening supply chains, modernising ration shops and improving distribution systems do not require massive spending; they require accountability and empathy.
The Budget can perhaps incentivise:
• Social reformers, civic groups, and volunteers to educate, guide and enhance the quality and outcome of services.
• CSR (corporate social responsibility) participation in parks, public spaces, festivals and social audits.
• Institutional responsibility for civic sense—banks, police stations, educational Institutions corporates, charitable institutions, temple authorities and organisations like tourism departments, travel agents and volunteers specifically identified exclusively to develop civic sense.
A cleaner, kinder, more responsive environment raises welfare far beyond monetary income.
Towards a Budget That Truly Delivers
India has the talent, technology and political stability to design a Budget that is not just fiscally sound but administratively transformative.
The FY26–27 Budget should aim to:
1. Simplify taxes and eliminate overlapping levies
2. Reform capital gains and market taxation
3. Strengthen administrative systems and data integrity
4. Support long-pending land and legal reforms
5. Enhance the everyday quality of life for citizens
A Budget built on clarity, dignity and administrative strength can unlock the next phase of India’s growth and ensure that citizens truly feel the benefits—enjoy, share happiness and feel as contributors to the economic growth in letter and spirit.
(Dr TV Gopalakrishnan is retired chief general manager of Reserve Bank of India-RBI)
