’90s software thrives again! What Raamdeo Agrawal said after Budget 2026

Raamdeo Agrawal, one of India’s most respected market voices, described the Union Budget 2026 as “a masterstroke for India’s digital future.” He called the 100% tax exemption for data centers until 2047 a decisive policy step, calling it a “1,000-pound gorilla decision.” Drawing parallels to the software boom of the 1990s, he said: “We are already adopting AI; now we are building the ‘AI Factory of the World’, driving massive investments in power, cables and infrastructure.”The market veteran also said that India’s long-term earnings story remains firmly intact despite near-term headwinds due to the increased securities transaction tax (STT) in the Union Budget 2026 earlier today. “But with a cautious fiscal deficit of 4.3% and a capex of Rs 12.2 lakh crore, the long-term profit story remains the real hero for India,” said Agrawal, chairman and co-founder of Motilal Oswal Financial Services.

According to the budget proposals, the STT on futures has been increased from 0.02% to 0.05%, while the levy on option premiums has been increased from 0.10% to 0.15%. In addition, the tax on the exercise of options has been increased from 0.125% to 0.15%. While he acknowledged that these measures could dampen trading activity in the short term, Agrawal warned that the elimination of dividend offsets and higher transaction costs were likely to create headwinds for the markets. “They make many high-frequency and arbitrage trades unfeasible, which will undermine market liquidity and leverage in the short term,” he said after the Budget presentation.

That said, Agrawal emphasized that the bigger picture remains constructive. He urged investors to keep a close eye on the coming monetary policy, stressing that sustained credit growth of 13 to 15% would be key to achieving nominal GDP growth above 10%.

Agrawal added that the finer details of the budget are equally important. The expansion of the definition of IT services provides long-awaited clarity on transfer pricing for global capacity centers (GCCs), sending a strong signal that India is open to high-end technology companies.

In the Budget, Nirmala Sitharaman doubled down on the government’s infrastructure-led growth strategy in the Union Budget 2026, by proposing a sharp increase in capital expenditure to Rs 12.2 lakh crore for the financial year 2026-27, compared to Rs 11.2 lakh crore in the current fiscal.

On the macroeconomic front, the government forecast GDP growth of 7.4% for the current fiscal year, with inflation expected to remain close to 2%. The budget deficit was set at 4.4% of GDP, signaling a continued commitment to fiscal consolidation, even as government expenditure remains high. (Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)