India's Union Budget 2026-2027: A Bold Blueprint for Viksit Bharat

 

India's Union Budget 26-27: A Bold Blueprint for Viksit Bharat

Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, marking a significant milestone on India's path toward becoming a developed nation by 2047. This budget, presented against the backdrop of global economic instabilities and trade interruptions, reflects an even-handed approach between fiscal discipline and ambitious growth targets.

    Source: AI Generated 

The Fiscal Roadmap: Walking the Tightrope

The government has demonstrated its pledge to fiscal prudence by targeting a fiscal deficit of 4.3% of GDP for 2026-27, down from 4.4% in the revised estimates for 2025-26. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026) This marks a progression of the fiscal consolidation path announced in FY 2021-22, which aimed to bring the deficit below 4.5%. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026)

More importantly, the budget includes a new fiscal anchor: the debt-to-GDP framework. The government intends to achieve a Central Government debt-to-GDP ratio of 50% (±1%) by March 2031. For the current financial year, this ratio is projected at 55.6%, down from 56.1% in 2025-26. (Upasani, 2026)

With nominal GDP growth estimated at 10% and real GDP growth projected between 6.8-7.2%, India continues to position itself as the world's fastest-growing major economy. (India's Gross Domestic Product (GDP) pegged at 6.4% in 2026, to remain the fastest-growing economy till next year despite global slowdown: Report, 2025) The government's fiscal strategy reconciles growth requirements with responsible economic management, particularly given the volatile global environment.

The Three Kartavyas: Guiding Principles

Finance Minister Sitharaman outlined three fundamental duties (kartavyas) that shape this budget:

1. Accelerating sustainable economic growth by improving productivity, competitiveness, and toughness
2. Building capacity and fulfilling aspirations through human capital development and institutional strengthening
3. Advancing inclusive development (Sabka Sath, Sabka Vikas), guaranteeing equitable opportunities throughout regions and communities

Manufacturing Renaissance: Seven Strategic Sectors

The budget places unprecedented emphasis on scaling up manufacturing in seven strategic and frontier sectors:

Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology & Innovation) is remarkable for an allocation of ₹10,000 crore over five years. (Union Budget 2026: 'Bio Pharma Shakti' gets Rs 10,000 crore over five years, FM Sitharaman’s big push, 2026) This initiative aims to establish India as a global biopharmaceutical manufacturing hub, focusing on the production of biologics and biosimilars. The program includes establishing three new National Institutes of Pharmaceutical Education and Research (NIPERs) and upgrading seven existing institutes.

Semiconductor Mission 2.0 expands India's semiconductor capabilities, building on the base established by the earlier mission. The Electronics Components Manufacturing Scheme receives an enhanced outlay of ₹40,000 crore, recognizing the key role of component manufacturing in the electronics value chain. (Das, 2026)

A particularly forward-looking initiative involves establishing dedicated rare-earth corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to promote mining, processing, and research of rare-earth minerals—essential to modern technology and defense applications. (Budget 2026: Rare-earth hubs to be set up in Odisha, Kerala, Andhra, TN, 2026)

Digital India Gets a Global Boost

Perhaps one of the most investor-friendly announcements is the tax holiday extended until 2047 for foreign companies providing global cloud services through Indian data centers. This positions India as a competitive destination for hyperscale data center investments, with a safe harbor provision offering a 15% cost allowance if the data center service provider is a related entity.

The budget also proposes a five-year tax exemption for non-residents who provide capital goods, equipment, or tooling to toll manufacturers in bonded zones, thereby further incentivizing manufacturing partnerships.

GIFT City: India's Financial Hub Ambitions

The government has substantially boosted the International Financial Services Centre (IFSC) at GIFT City by extending the tax holiday from 10 to 20 years, followed by a concessional tax regime. (Union Budget 2026-27: Centre doubles GIFT City tax holiday to 20 years, 2026) This long-term policy certainty aims to attract sustained foreign capital and high-value financial services, positioning India as a global financial hub.

Individual Persons Resident Outside India (PROIs) will now be permitted to invest in equity instruments, while new provisions support corporate bonds and municipal bonds, deepening India's capital markets.

Tax Reforms: Simplification and Compliance

While income tax slabs remain unchanged for both old and new tax regimes, the budget introduces several notable tax reforms:

• Minimum Alternate Tax (MAT) reduced from 15% to 14% from tax year 2026-27 onwards (Union Budget 2026: Taxpayers, investors, consumers — who gains, who hurts?, 2026)
• Companies opting for the concessional tax regime can set off 25% of available MAT credit against tax liability
• Securities Transaction Tax (STT) increased on futures (from 0.02% to 0.05%) and options (to 0.15%) to curb excessive speculation (Tiwari, 2026)
• Tax Collection at Source (TCS) rates rationalized to 2% for sellers of specific goods, including alcoholic liquor, scrap, and minerals
• Buyback taxation revised, making it taxable as capital gains with effective tax rates of 22% for corporate promoters and 30% for non-corporate promoters

A Joint Committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes will incorporate the Income Computation and Disclosure Standards (ICDS) requirements into the Indian Accounting Standards (IndAS), eliminating duplicate accounting from tax year 2027-28.

Capital Expenditure: Powering Infrastructure

Public capital expenditure is budgeted at ₹12.2 lakh crore for FY27, indicating the government's continued focus on infrastructure development. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026) This includes investments in freight corridors, national waterways (with 20 new waterways planned), high-speed rail, and urban infrastructure in tier-2 and tier-3 cities.

The emphasis on cities with populations above five lakh aims to produce a robust pipeline of revenue-generating infrastructure assets, notably benefiting Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).

Social Sector and Inclusion

The budget demonstrates a strong devotion to inclusive growth:

• Health and Family Welfare Ministry receives ₹1,06,530.42 crore, nearly 10% higher than revised estimates for 2025-26 (Service, 2026)
• Divyang Kaushal Yojana proposed to provide customized training for persons with disabilities in IT, animation, visual graphics, gaming, comics (AVGC), and hospitality sectors
• Significant allocations for Scheduled Castes, Scheduled Tribes, and the North Eastern Region
• 500 reservoirs and Amrit Sarovars to be developed for the coastal fisheries value chain strengthening
• Khelo India Mission to transform the sports sector over the next decade

Revenue Mobilization and Devolution

Gross tax revenue is budgeted at ₹44.04 lakh crore, representing 8% growth over revised estimates for 2025-26. Direct taxes contribute 61.2% (₹26.97 lakh crore), whereas indirect taxes account for ₹17.07 lakh crore. (Desk, 2026)

The central government will transfer ₹26,20,769 crore to states in 2026-27—a 12.2% increase over 2025-26. This includes tax devolution of ₹15,26,255 crore and grants and loans worth ₹10,94,514 crore, with ₹1,85,000 crore allocated as capital expenditure loans to states. (Centre Releases ₹1.73 Trillion to States to Boost Capital Spending, 2025)

The government has accepted the 16th Finance Commission's recommendation to retain the vertical share of devolution at 41%. (16th Finance Commission retains 41% devolution, introduces GDP criterion, 2026)

The Road Ahead: Harmonizing Growth and Prudence

Union Budget 2026-27 presents a mature and confidence-driven policy stance. While it prioritizes fiscal consolidation and structural reform, some economists question whether the 6% growth in total government expenditure is adequate to support the ambitious 10% nominal GDP growth target.

With total expenditure budgeted at ₹51,29,844 crore (about 13% of GDP), the budget reflects consolidation and rationalization rather than expansive new programs. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026) The critical question remains: can private investment fill the gap if public spending growth remains modest?

Nevertheless, the budget's emphasis on manufacturing, digital infrastructure, skill development, and key sectors positions India well for long-term competitiveness. The extension of tax incentives, regulatory clarity, and focus on ease of doing business signal India's readiness to integrate more firmly with global value chains while building domestic capabilities.

As India navigates global trade uncertainties and supply chain realignments, Budget 2026-27 presents a roadmap that achieves immediate financial responsibility with extended growth aspirations—a subtle balance key for achieving Viksit Bharat by 2047.

The verdict? This budget may not offer dramatic headline-grabbing announcements, but it provides policy continuity, regulatory certainty, and strategic direction—ingredients that are often more valuable than populist measures for sustainable economic transformation.

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Keep informed about the latest financial policies and economic developments at www.drbhupeshlohar.com

References

1. (February 1, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. AP News. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7
2. (February 2, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. Associated Press. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7
3. Upasani, S. (February 1, 2026). Centre targets lower debt-to-GDP ratio, pegs it at 55.6% in FY27. The Indian Express. https://indianexpress.com/article/business/in-new-debt-to-gdp-era-fy27-target-set-at-55-6-10507831/
4. (July 2, 2025). India's Gross Domestic Product (GDP) pegged at 6.4% in 2026, to remain fastest-growing economy till next year despite global slowdown: Report. IBEF. https://www.ibef.org/news/india-s-gross-domestic-product-gdp-pegged-at-6-4-in-2026-to-remain-fastest-growing-economy-till-next-year-despite-global-slowdown-report
5. (February 1, 2026). Union Budget 2026: 'Bio Pharma Shakti' gets Rs 10,000 crore over five years, FM Sitharaman’s big push. BusinessToday. https://www.businesstoday.in/union-budget/news/story/union-budget-2026-bio-pharma-shakti-gets-rs-10000-crore-over-five-years-fm-sitharamans-big-push-513892-2026-02-01/
6. Das, S. (February 1, 2026). Budget FY27: India approves second semiconductor scheme, electronics incentive increased to ₹40,000 crore. Mint. https://www.livemint.com/budget/budget-fy27-india-approves-second-semiconductor-scheme-electronics-incentive-increased-to-40-000-crore-11769925368780.html
7. (February 1, 2026). Budget 2026: Rare-earth hubs to be set up in Odisha, Kerala, Andhra, TN. Business Standard. https://www.business-standard.com/budget/news/budget-2026-rare-earth-corridors-odisha-kerala-andhra-pradesh-tamil-nadu-126020100275_1.html
8. (February 1, 2026). Union Budget 2026-27: Centre doubles GIFT City tax holiday to 20 years. Business Standard. https://www.business-standard.com/budget/news/centre-doubles-gift-city-tax-holiday-20-years-126020100926_1.html
9. (February 1, 2026). Union Budget 2026: Taxpayers, investors, consumers — who gains, who hurts?. The Times of India. https://timesofindia.indiatimes.com/business/india-business/union-budget-2026-taxpayers-investors-consumers-who-gains-who-hurts/articleshow/127852620.cms
10. Tiwari, K. (February 1, 2026). Union Budget 2026-27: STT increase on F&O to curb speculative trade. Business Standard. https://www.business-standard.com/markets/news/markets-fm-hikes-stt-on-fo-trades-surprise-move-126020100888_1.html
11. (February 1, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. AP News. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7
12. Service, I. N. (February 1, 2026). Union Budget 2026: Enhanced Healthcare Allocations Explained. NDTV. https://www.ndtv.com/health/govt-allocates-rs-1-05-530-42-crore-for-health-in-budget-2026-10925099
13. Desk, R. M. (February 1, 2026). Budget 2026-27: Tax Revenue Breakdown. Rediff Moneynews. https://money.rediff.com/news/market/budget-2026-27-tax-revenue-breakdown/41173520260201
14. (January 10, 2025). Centre Releases ₹1.73 Trillion to States to Boost Capital Spending. Current Affairs Adda247. https://currentaffairs.adda247.com/centre-releases-%E2%82%B91-73-trillion-to-states-to-boost-capital-spending/
15. (February 1, 2026). 16th Finance Commission retains 41% devolution, introduces GDP criterion. Business Standard. https://www.business-standard.com/budget/news/16th-finance-commission-retains-41-percent-devolution-gdp-criterion-126020101042_1.html/
16. (February 1, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. AP News. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7

 

Is Tokenization Set to Transform the Global Economy?

Insights from the World Economic Forum 2026 Panel Discussions

                    Source: Generative AI

Introduction: From Buzzword to Building Block

In the last ten years, tokenization has moved from a small blockchain experiment linked to cryptocurrencies to a main topic for policymakers, regulators, and CEOs. At the World Economic Forum 2026, it was seen as a major change in how value is created, stored, transferred, and managed—not just speculation.

Panels at Davos focused on a central question:

Is tokenization the future of finance and the real economy, or simply another technological trend?

This article examines whether tokenization is the future, drawing on key ideas, debates, and agreements from the WEF 2026 panel discussions.

What Do We Mean by Tokenization? (A Practical Definition)

Tokenization is the conversion of real-world or financial assets into digital tokens on a blockchain or distributed ledger. These tokens can stand for:

• Financial assets (equities, bonds, funds)
• Real assets (real estate, commodities, art)
• Intangible assets (carbon credits, intellectual property)
• Rights and utilities (voting rights, access rights, revenue shares)

At WEF 2026, panelists pointed out an important difference:

Tokenization is not focused on crypto speculation; it is about building financial infrastructure.

The real benefits are efficiency, programmability, transparency, and accessibility, not price swings.

Why Tokenization Took Center Stage at WEF 2026

Three global trends made tokenization a big topic at Davos:

Old financial systems are still fragmented, slow, and expensive, especially for cross-border transactions, settlements, and reconciliations. Tokenization offers:

• Near-instant settlement
• Reduced counterparty risk
• Lower operational costs (The Impact of Distributed Ledger Technology and Tokenization in Fixed Income Issuance, n.d.)

2. Demand for Financial Inclusion

Panelists said tokenized assets could make investing easier, allowing people to own fractions of assets and letting more investors join in—something usually limited to big institutions. (What is 'tokenization'? How does it make investing easier? (2026)

3. Programmable smart contracts let assets include rules like automatic compliance, dividend payments, or transfers based on conditions. This is changing how markets work. (Vaziry et al., 2026)

The WEF 2026 Consensus: Tokenization Is Inevitable—but Not Uniform

A main takeaway from WEF 2026 was that most panelists agreed on where tokenization is headed, but they had different views on how fast and how far it will go. Globalization in capital markets is expected to grow a lot. (Global Economic Prospects, January 2026)

• Institutional adoption will lead to retail adoption.
• Regulation will shape success more than technology.

Where Opinions Diverged

• Will public or permissioned blockchains dominate?
• How fast can regulation adapt?
• Will tokenization replace or merely augment existing systems?

Among the areas discussed, capital markets tokenization stood out as one of the strongest use cases at WEF 2026. (Rooz, 2025)

Key Benefits Highlighted

• T+0 settlement instead of T+2/T+3
• Real-time transparency of ownership
• Reduced reliance on intermediaries
• Lower post-trade reconciliation costs (Kunthu et al., 2025)

Panelists from global banks and exchanges noted that tokenized bonds and funds are already being issued in controlled environments. The focus has shifted from whether tokenized securities will scale to how quickly they will. (Tokenization and Compliance: Building AML/KYC-Ready Infrastructure, 2025)

“We are not tokenizing assets for novelty—we are tokenizing inefficiencies.”
— WEF 2026 panelist, Global Investment Bank CEO

Real-World Assets (RWA): Unlocking Illiquid Markets

Tokenization of real-world assets was presented as a structural breakthrough. (Davos Forum Concludes: Tokenization Emerges as Hottest Topic, Industry Leaders Bullish on 2026 Super Cycle, 2026)

Examples Discussed at WEF

• Fractional ownership of commercial real estate
• Tokenized infrastructure projects
• Commodity-backed tokens
• Carbon credits and environmental assets

These assets traditionally suffer from:

• Illiquidity
• High minimum investment sizes
• Limited transparency

In summary, tokenization could turn traditionally illiquid assets into tradable, divisible, globally accessible instruments—if legal ownership ties to digital tokens are clearly established. (Borjigin et al., 2025)

Technology provides the foundation, but WEF 2026 discussions showed that regulation remains central to progress. (Is Tokenization the Future? | World Economic Forum Annual Meeting 2026, 2026)

Regulatory Themes That Dominated

• Legal recognition of tokenized ownership
• Custody and investor protection
• AML/KYC embedded into smart contracts
• Jurisdictional harmonization

A key insight: Tokenization will succeed by embedding regulatory requirements into code, not by bypassing them. (Vaziry et al., 2026)

Panelists stressed “compliance by design,” where regulatory rules are enforced automatically through programmable assets. (Vaziry et al., 2026)

Central Banks, CBDCs, and Tokenized Money

Another major WEF 2026 discussion point was the intersection of:

• Tokenized assets
• Central Bank Digital Currencies (CBDCs)
• Wholesale settlement systems

Panelists noted that without tokenized money, tokenized assets lose much of their efficiency. Many argued that CBDCs or tokenized deposits are crucial for a fully tokenized financial ecosystem. (Zhang, 2026)

This integration could:

• Enable atomic settlement (asset vs money)
• Reduce systemic risk
• Improve monetary policy transmission. (Kunthu et al., 2025)

Risks and Challenges: What WEF 2026 Warned Against

Despite optimism, panels acknowledged the risks.

1. Fragmentation Risk

Multiple blockchains, standards, and platforms could recreate the silos that tokenization seeks to eliminate. (Why Does Interoperability Remain A Problem Across Tokenization Platforms?, 2025)

2. Cyber and Smart Contract Risks

Bugs, hacks, and governance failures remain threats.

3. Illusion of Liquidity

Tokenization does not guarantee buyers. Liquidity depends on market depth, not technology. (Agur et al., 2025)

4. Digital Divide

Without careful design, tokenization may worsen inequality. (Tylinski et al., 2025)

Tokenization Beyond Finance: A Broader Economic Shift

WEF 2026 panels stressed that tokenization is not limited to finance.

Emerging Non-Financial Use Cases

• Tokenized intellectual property royalties
• Digital identities linked to economic rights
• Supply chain traceability tokens
• Data ownership and monetization

This broader vision positions tokenization within the Internet of Value, enabling assets, data, and rights to move as seamlessly as information does today. (Borjigin et al., 2025)

With this broadened view, a central debate at WEF 2026 focused on whether tokenization is revolutionary or evolutionary.

A central debate at WEF 2026 focused on this distinction. One view: Tokenization will replace legacy systems.

• Evolutionary view: Tokenization will quietly integrate, modernizing infrastructure without visible disruption.

After considering both perspectives, the prevailing view favored an evolutionary approach. (Is Tokenization the Future? | World Economic Forum Annual Meeting 2026, 2026)

“Most users will never know they are using tokenized systems—and that’s when we’ll know it worked.”

What This Means for Businesses, Investors, and Policymakers

For Businesses

• Prepare for tokenized fundraising and asset management.
• Rethink balance sheets and ownership structures.

For Investors

• New asset classes and fractional access
• Greater transparency—but new risk dimensions

For Policymakers

• Shift from reactive to anticipatory regulation.
• Coordinate globally to avoid regulatory arbitrage.

Returning to the initial question: Is tokenization the future?

Based on WEF 2026 discussions, tokenization will define the future of financial infrastructure. However, it will depart sharply from today's speculative, unregulated crypto markets. (Is Tokenization the Future? | World Economic Forum Annual Meeting 2026, 2026)

Tokenization’s future is:

• Institutional, not speculative
• Regulated, not anarchic
• Integrated, not isolated

Conclusion: The Quiet Transformation Ahead

The lesson from WEF 2026 is that tokenization is moving from promise to practice. Adoption will involve backend upgrades, pilot projects, regulations, and gradual rollout, not dramatic shifts.

Like the internet transformed commerce without most users knowing how it worked, tokenization may reshape ownership and finance without broad awareness.

Ultimately, as reflected at WEF 2026, tokenization is set to fundamentally restructure global finance. Its impact will extend beyond streamlining processes—it will drive new forms of ownership, market participation, and regulatory frameworks. This transformation will take place quietly yet profoundly, shaping a more inclusive, efficient, and transparent system. For businesses, investors, and policymakers, the message is clear: tokenization demands proactive adaptation for those intent on thriving in the next era.

References

Gagua, F. (June 1, 2025). SWIFT cites high cost of splintered financial world. Asian Banking & Finance. https://asianbankingandfinance.net/exclusive/swift-cites-high-cost-of-splintered-financial-world

(n.d.). The Impact of Distributed Ledger Technology and Tokenization in Fixed Income Issuance. https://www.asifma.org/wp-content/uploads/2025/09/full-report-dlt-report-final3.pdf

(2026). What is 'tokenization'? How does it make investing easier?. World Economic Forum. https://www.weforum.org/videos/what-is-tokenization-how-does-it-make-investing-easier/

Vaziry, A., Wronka, C., Garzon, S. R. & Küpper, A. (2026). Know Your Contract: Extending eIDAS Trust into Public Blockchains. arXiv preprint arXiv:2601.13903. https://doi.org/10.48550/arXiv.2601.13903

(n.d.). Global Economic Prospects, January 2026. https://www.worldbank.org/en/news/press-release/2026/01/13/global-economic-prospects-january-2026-press-release

Rooz, Y. (2025). Tokenization and on-chain capital markets are reshaping global finance. World Economic Forum. https://www.weforum.org/stories/2025/03/tokenization-and-on-chain-capital-markets//

Kunthu, B. R., Taware, R. N. & Anumula, S. K. (2025). Blockchain-Anchored Audit Trail Model for Transparent Inter-Operator Settlement. arXiv preprint 2512.09938. https://doi.org/10.48550/arXiv.2512.09938

(2025). Tokenization and Compliance: Building AML/KYC-Ready Infrastructure. GlobalTokenize. https://globaltokenize.com/2025/11/03/tokenization-and-compliance-building-aml-kyc-ready-infrastructure/

(January 22, 2026). Davos Forum Concludes: Tokenization Emerges as Hottest Topic, Industry Leaders Bullish on 2026 Super Cycle. ([ainvest.com](https://www.ainvest.com/news/davos-forum-concludes-tokenization-emerges-hottest-topic-industry-leaders-bullish-2026-super-cycle-2601-99/?utm_source=openai)). https://www.ainvest.com/news/davos-forum-concludes-tokenization-emerges-hottest-topic-industry-leaders-bullish-2026-super-cycle-2601-99/

Borjigin, A., He, C., Lee, C. C. & Zhou, W. (2025). Element and Everything Tokens: Two-Tier Architecture for Mobilizing Alternative Assets. arXiv:2508.11266. https://doi.org/10.48550/arXiv.2508.11266

(January 21, 2026). Is Tokenization the Future? | World Economic Forum Annual Meeting 2026. World Economic Forum. https://www.youtube.com/watch?v=CBW7Sl9PmDI

Vaziry, A., Wronka, C., Garzon, S. R. & Küpper, A. (2026). Know Your Contract: Extending eIDAS Trust into Public Blockchains. arXiv preprint. https://doi.org/10.48550/arXiv.2601.13903

Vaziry, A., Wronka, C., Garzon, S. R. & Küpper, A. (2026). Know Your Contract: Extending eIDAS Trust into Public Blockchains. arXiv preprint 2601.13903. https://doi.org/10.48550/arXiv.2601.13903

Zhang, J. G. (January 15, 2026). CBDCs and Stablecoins: Balancing Efficiency and Regulation. LinkedIn. https://www.linkedin.com/posts/john-guan-jing-zhang-35a631177_digital-finance-in-2026-what-to-expect-as-activity-7413818119736975360-wD9i

Kunthu, B. R., Taware, R. N. & Anumula, S. K. (2025). Blockchain-Anchored Audit Trail Model for Transparent Inter-Operator Settlement. Eurasian Economic Review. https://doi.org/10.1007/s40822-025-00353-8

(November 30, 2025). Why Does Interoperability Remain A Problem Across Tokenization Platforms?. Outlook India. https://www.outlookindia.com/xhub/blockchain-insights/why-does-interoperability-remain-a-problem-across-tokenization-platforms

Agur, I., Villegas-Bauer, G., Mancini-Griffoli, T. & Peria, M. S. (2025). Tokenization and Financial Market Inefficiencies. Fintech Notes 2025. https://doi.org/10.5089/9798400298905.063

Tylinski, K., Satybaldy, A. & Tasca, P. (2025). Consensus Power Inequality: A Comparative Study of Blockchain Networks. arXiv preprint arXiv:2506.14393. https://doi.org/10.48550/arXiv.2506.14393

Borjigin, A., He, C., Lee, C. C. & Zhou, W. (2025). Element and Everything Tokens: Two-Tier Architecture for Mobilizing Alternative Assets. arXiv preprint 2508.11266. https://doi.org/10.48550/arXiv.2508.11266

(January 21, 2026). Is Tokenization the Future? | World Economic Forum Annual Meeting 2026. World Economic Forum. https://www.youtube.com/watch?v=CBW7Sl9PmDI

(January 21, 2026). Is Tokenization the Future? | World Economic Forum Annual Meeting 2026. World Economic Forum. https://www.youtube.com/watch?v=CBW7Sl9PmDI

Learning from the Indian Stock Market in 2025 - an in-depth analysis

 Learning from the Indian Stock Market in 2025 - an in-depth analysis

2025 has been a year of contrasts for Indian equities. Headlines alternated between structural optimism - a large, growing domestic savings pool, ongoing IPO reforms, and a resilient economy - and near-term headwinds such as heavy foreign selling, cyclical earnings weakness, and shifting global rates. By December 2025 the picture is clearer: India delivered underwhelming returns relative to many peers, policy and regulatory moves changed market plumbing, and the year offered several teachable lessons for investors, corporate managers and policy makers alike. This post breaks down what happened, why it mattered, and the practical lessons to carry into 2026.

Source: Generative AI

The scoreboard: modest index gains, large underlying churn

On an index level the year was muted. Multiple market trackers and analysts describe 2025 as a year in which the Nifty and Sensex produced modest gains while suffering from uneven internals - a narrow set of winners and broad weaknesses elsewhere. Several market commentaries put the Nifty’s year-to-date performance in single digit territory and flagged India as one of the weaker major markets during 2025. 

But index percent changes hide two important realities: (1) persistent foreign institutional investor (FII/FPI) outflows that pressured many large-cap names, and (2) strong domestic flows from mutual funds and retail that supported pockets of the market. The National Stock Exchange (NSE) trading reports show that daily FII/DII nets still moved the market meaningfully on many sessions, underlining how the balance between domestic and foreign flows shaped 2025’s price action. 

Macro backdrop and the central bank

The macro story in 2025 mixed easing inflation pressures with global rate volatility. The Reserve Bank of India (RBI) moved through a gradual easing cycle in the year, cutting the policy repo rate toward the end of the year - one policy timeline shows a repo rate falling to 5.25% by December 5, 2025 - aiming to stimulate credit and growth. Yet bond markets often behaved as if the easing cycle was uncertain, with traders pricing higher yields in response to global treasury moves and worries about sticky inflation/real rates. That dislocation - lower policy rates but higher market yields at times - complicated corporate funding and equity valuations.  

Lesson: monetary policy direction matters, but so does market perception of persistence. For equity investors, falling policy rates can be supportive, but if bond yields are rising due to global spillovers, the equity risk premium may not compress as expected - hurting price appreciation.

Capital flows: the dominant theme

Perhaps the single most important structural theme of 2025 was capital flows. After years of strong foreign appetite for Indian assets, 2025 saw sustained FPI outflows, with some reports estimating tens of billions of dollars of net selling across 2024 - 25. These outflows pushed foreign ownership to multi-year lows in certain segments, amplifying volatility and placing greater reliance on domestic buyers to prop up prices. 

Source: Generative AI

At the same time, domestic institutional investors - mutual funds, insurance funds, pension pools - continued to increase allocations to equities. Analysts forecasted that steady domestic flows could be a stabilizing force heading into 2026, with some brokers projecting sizable ongoing monthly flows from domestic sources. But domestic flows were insufficient in 2025 to fully offset the magnitude and timing of foreign withdrawals, causing sectoral and stock-level dislocations.  

Lesson: market breadth and durability depend on a diverse and sizeable domestic investor base. For policy makers, deepening pension and insurance investments into equities reduces vulnerability; for active managers, monitoring who is behind buying/selling is as important as price action.

Earnings reality: slow and uneven

A big reason 2025’s rally was tepid is earnings - corporate profits slowed and beats were less frequent than in previous expansionary years. Where earnings did surprise, it tended to be in cyclical sectors (banks, auto suppliers, some industrials) while staples, IT services and pharma showed more modest growth or margin pressure. Analysts’ 2026 scenario planning often points to banks, autos and power as expected contributors to EPS recovery, but only if macro momentum improves. 

Lesson: index moves driven by a few mega caps can mask weak overall earnings health. Investors should stress-test portfolios for earnings sensitivity and not rely solely on momentum or thematic narratives.

Regulation and market structure - active year for SEBI

2025 was active on the regulatory front. SEBI issued several reforms - from governance tweaks for market infrastructure institutions to IPO amendments aimed at reshaping listing mechanics and public float timelines. Some proposals also touched disclosure and conflicts of interest for senior officials. These moves reflect a regulator balancing investor protection with capital-market growth. The net effect: a slightly more structured IPO pipeline but also short-term uncertainty for issuers navigating new compliance timelines.  

Lesson: regulatory risk is real and can reshape supply dynamics (IPO cadence, secondary placements). For corporate issuers, clarity and early engagement with the regulator can smooth access to capital. For investors, regulatory signals can be contrarian entry points - but only after understanding the intent and time horizon of reforms.

 Sector winners and losers - a quick map

• Banks and financials: Resilient retail credit growth and improving asset quality helped pockets of private banks. Analysts expected banking to be a leading EPS driver into 2026, conditional on steady credit growth.  
• Auto and cyclical manufacturing: Demand recovery in autos and capex pickup supported autos and related suppliers.
• IT and exports: IT remained mixed - pricing pressure and client budgets constrained growth in places, while some niche software vendors still found pockets of revenue strength.
• Commodities, metals and energy: Volatility in global commodity prices created idiosyncratic winners and losers; commodity firms with better balance sheets outperformed peers.

Lesson: sector allocation mattered more than blind index exposure in 2025. Investors who rotated into cyclicals early and managed earnings risk tended to outperform.

What investors - retail and institutional - learned

1. Follow the flows, not only fundamentals. 2025 showed that even reasonable fundamentals can be overwhelmed by large, persistent outflows. Successful investors watched the direction and type of flows (FPI vs DII) and sized positions accordingly.
2. Diversify sources of return. With single-market risk elevated, investors with multi-asset or global tilts could offset India risk when it underperformed. Within India, diversification across sectors and market-cap bands mitigated concentration shocks.
3. Manage liquidity risk actively. Even liquid large-cap stocks saw episodic liquidity vacuums when selling intensified. Position sizing and stop-loss discipline mattered more than ever.
4. Be valuation-aware, not valuation-afraid. 2025 reset some stretched valuations; patient, disciplined entry based on normalized earnings scenarios proved rewarding in select names.
5. Policy/regulation monitoring is essential. SEBI moves and RBI communications materially affected market mechanics. Proactive regulatory monitoring became a routine part of investment research, not an afterthought.

Practical strategies for 2026 (evidence-based takeaways)

     Source: Generative AI

• Tilt to domestic demand plays if FPI outflows persist. If foreign selling continues, sectors supported by domestic consumption and retail flows (consumer finance, select retail names, housing finance) may be more resilient.  
• Avoid one-way bets on crowded growth names that rely on perpetual multiple expansion; instead focus on earnings quality and balance-sheet strength.
• Consider systematic investment plans (SIPs) and dollar-cost averaging for long-term investors domestic inflows and patient buying smoothing helped many retail investors in volatile 2025 sessions.
• Keep an eye on rates and bond market signals. The unusual episodes where policy easing coincided with rising market yields underscore that bond market signals (yields, OIS) often preview equity pressure points.  

Final thought - a market of both risk and resilience

2025 reinforced a balanced narrative: India’s capital markets remain deepening and structurally attractive over the long term, yet they are not immune to global cycles, liquidity shifts and regulatory recalibration. The year highlighted the increasing importance of domestic savings and institutional flows as the ballast for market stability. It also reminded investors that macro, flows and regulation can be just as price-determining as corporate fundamentals in any given year.

As brokers and strategists look to 2026, many see room for recovery if earnings revive and domestic flows persist - a view that some firms publicly reiterated in December 2025. But recovery is not guaranteed, and the lessons from 2025 are plain: watch flows, respect valuations, manage liquidity, and stay close to policy and regulatory signals. Those who internalize these lessons will be better prepared for whatever the next year brings.

 

Selected sources and reporting used for this analysis (December 2025): Reuters coverage and market news on flows and policy; NSE flow data; SEBI regulatory updates; broker notes on 2026 outlook and sector EPS expectations; and market commentary summarizing 2025 index performance.

 

Upcoming GST Reforms in India: New Rates, Slabs, and Key Changes in 2025

 

India’s GST 2.0: A Landmark Overhaul Ahead of Diwali 2025

1. Introduction to GST 2.0

India’s Goods and Services Tax (GST), introduced in July 2017, has brought uniformity and efficiency to the country’s indirect tax structure. However, its multiple rate slabs (5%, 12%, 18%, and 28%, along with special levies) have long invited calls for simplification. In mid-2025, Prime Minister Narendra Modi announced a major “next-generation” GST reform—dubbed GST 2.0—promising a streamlined, pro-consumer system by Diwali 2025.

2. Key Changes: Two-Slab System + Sin Tax

• New Two-Slab Tax Structure: The current four-tier rates (5%, 12%, 18%, 28%) will be consolidated into two main slabs:

  • 5% for essentials and merit goods

  • 18% for standard goods and most consumer items.

• Addition of a 40% “Sin Tax” Slab: A new higher slab targeting demerit or luxury items (such as tobacco, alcohol, fast food, luxury cars, and online gaming) is proposed to discourage harmful consumption while generating state revenue.

3. How Product Categories Are Affected

12% → 5%: Almost all items previously taxed at 12%—like dry fruits, juices, and certain processed foods—will see a major drop to 5%.

28% → 18%: Nearly 90% of items classified under 28%—including TVs, ACs, refrigerators, and building materials (e.g., cement)—will shift to 18%. Expected to lead to price drops in home appliances and construction sectors.

Sin Goods → 40%: A separate, stiff 40% slab will apply to luxury and sin goods, reinforcing public health objectives while funding state coffers.

Special Rates Unchanged: Items like jewelry, precious stones, and most essential goods remain unaffected—jewelry stays taxed at 3%, stones at 0.25%, and essentials at 0%.

4. Implementation Timeline

Group of Ministers (GoM) Approval: A government panel has cleared the proposal for a simplified GST slab structure and fast-tracked GST Council deliberations expected in early September 2025.

GST Council Meets Sept 3–4: Final approval is anticipated in the GST Council’s early September meeting. States and industries are pushing for prompt implementation to coincide with the Diwali festival window.

5. Benefits: Consumers, Real Estate, Economy

1. Boost to Household Affordability

Streamlined rates and reduced GST on essentials and appliances aim to put more money in consumers' hands—just in time for festive spending sprees.

2. Real Estate Gets a Break

Lower GST on building materials (like cement) translates to 2–4% lower housing prices in the affordable segment. Developers and buyers alike stand to benefit.

3. Stimulating Consumption & Growth

Lower taxes on vehicles and household items may ignite spending — especially on small cars, which could jump from 28% to 18%, although EVs remain at 5%. However, this may slow EV adoption.

4. Simpler Tax Framework

Fewer slabs mean fewer disputes, better compliance, and streamlined operations for businesses and tax authorities.

6. Risks & Concerns

• State Revenue Concerns
  

  States like Kerala warn the reforms could slash GST income significantly—up to ₹8,000 crore this year alone. Calls for a compensation mechanism reminiscent of GST’s rollout era are mounting.

• Revenue Impact on Center
  

  Projections suggest the GST rationalization might cost the central government ₹85,000 crore annually, marking a substantial fiscal risk.

• Shift in Consumer Behavior
  

  Lower taxes on small ICE vehicles risk undoing EV incentive progress, potentially slowing green mobility momentum.

  Quick Summary Table

  
  

  Element	Current (2025)	GST 2.0 Proposal
  Tax Slabs	5%, 12%, 18%, 28%	5%, 18%, (40% on sin goods)
  Goods Moving to 5%	A few essential items	~99% of current 12% items
  Goods Moving to 18%	TVs, appliances, etc. at 28%	~90% of current 28% items
  Sin Goods Rate	Various including cess	40% flat rate
  Timeline	Multi-year structure	Implementation expected by Diwali 2025
  Risks	Complex compliance	Revenue loss, EV shift, state compensation

  
  
  
  

  7. Conclusion

  The upcoming GST reforms in India for 2025 signal a significant shift toward a more simplified, equitable, and efficient taxation framework. With proposed changes like rationalization of tax slabs, clearer distinction between goods and services, streamlined compliance through e-invoicing, and the anticipated inclusion of petroleum and alcohol under the GST umbrella, the government is taking concrete steps to expand the tax base and reduce ambiguity.

  These reforms are expected to ease the burden on small businesses, enhance the transparency of tax collection, and support the government’s larger vision of a “One Nation, One Tax” regime. As always, any change in taxation affects all sectors — from manufacturers and service providers to end consumers. Thus, it's critical for all stakeholders to stay updated and prepare for a seamless transition.