Will FM Sitharaman’s Union Budget help mitigate impact of Trump’s tariffs?

Anticipation Builds Ahead of Historic Sunday Budget Presentation

India stands on the cusp of a pivotal financial moment as Finance Minister Nirmala Sitharaman prepares to unveil the Union Budget 2026-27 on Sunday, February 1—a rare occurrence not seen in decades. This unorthodox timing underscores the urgency amid global economic headwinds, particularly the threat of steep tariffs from US President Donald Trump's administration. Businesses, households, and policymakers are watching closely, hoping for measures that fortify India's growth story against potential trade disruptions. The Budget Session of Parliament kicks off on January 28, setting the stage for intense debates on fiscal priorities. Salaried workers, grappling with rising costs in education, healthcare, and housing, are pinning hopes on relief that could ease their monthly burdens despite recent moderation in headline inflation to 1.33%. Industry leaders emphasize the need for strategies that enhance domestic resilience, from boosting local manufacturing to simplifying taxes, all while navigating an uncertain international landscape.

The shadow of Trump's tariffs looms large, with fears that higher duties on Indian exports like steel, pharmaceuticals, and IT services could dent competitiveness. Analysts point out that India's export-led sectors might face cost pressures, prompting calls for proactive safeguards in the budget. This comes as the government balances fiscal prudence—last year's revised estimates pegged the deficit at 4.8% of GDP—with ambitions for inclusive growth. Expectations are high for announcements that invigorate private investments, uplift rural prosperity, and spur employment-led development, echoing themes from prior fiscal roadmaps.

Household Relief Tops Expectations: Tax Cuts and Cost-of-Living Measures

For millions of middle-class families, the budget represents a lifeline to restore disposable incomes stretched thin by everyday expenses. Surveys reveal strong demand for income tax slab revisions, with 44.1% of respondents seeking lower rates to boost savings and spending power. There's buzz around raising the threshold for the 30% slab, inflation-linking adjustments, and enhancing the new tax regime's appeal through deductions for provident funds, health insurance, and housing loans. Experts advocate for a simpler framework with fewer disputes and faster refunds, building on recent reforms like the taxpayer charter and Vivad se Vishwas scheme.

If Budget 2026 moves towards a simpler New Tax Regime with clear savings incentives, along with GST simplification and sustained spending on infrastructure, green energy and MSMEs, household confidence can improve, said Ram Medury, founder and CEO of Maxiom Wealth.

Beyond taxes, households crave cheaper goods via boosted local production and MSME support, alongside incentives for affordable housing. While fiscal space might limit major cuts after last year's personal income tax and GST reductions, tweaks like rationalizing surcharges or introducing joint taxation for couples could provide meaningful relief without straining revenues.

Industry Seeks Shields Against Tariffs: Manufacturing, EVs, and Infrastructure Push

India Inc is urging the government to prioritize trade safeguards, duty rationalization on steel inputs, and long-term financing for manufacturing upgrades to counter tariff impacts. Sectors like steel hope for better scrap recycling and GST tweaks on inputs, while real estate eyes expanded tax benefits under Sections 24(b) and 80-IBA to fuel urban housing demand amid double-digit price rises. The railways, often called the lifeline of India, anticipate privatization boosts and infrastructure investments.

Green initiatives feature prominently, with calls to slash GST on EV charging from 18% to 5%, expand charging networks in Tier II cities, and convert commercial vehicles to electric models to combat urban pollution in cities like Delhi and Mumbai. Defence spending, renewables for the 500 GW target, and MSME aid round out key asks, aiming to steady consumption and position India for global resilience. Leaders stress converting policy intent into durable outcomes through capacity expansion and innovation funding.

In wrapping up, Budget 2026 expectations center on tax relief for households, manufacturing fortifications against Trump tariffs, and green infrastructure pushes. Whether FM Sitharaman's blueprint delivers on these fronts will shape India's economic trajectory in a volatile world, blending immediate relief with long-term reforms for prosperity.