Market volatility following the Union Budget does not reflect the substance or eventual impact of the fiscal plan, Economic Advisor to Prime Minister Sanjeev Sanyal said on Sunday, pushing back against claims that the immediate sell-off amounted to a rejection of the government’s economic strategy.Speaking in an exclusive interview to NDTV, Sanyal said short-term market movements often react to sentiment, positioning and technical factors rather than a detailed reading of budget measures. He argued that drawing conclusions about policy effectiveness from a single trading session risks misinterpreting how capital markets process fiscal signals.
Equity benchmarks fell sharply after Finance Minister Nirmala Sitharaman presented her ninth consecutive budget, with selling pressure visible across banking, capital goods and consumer stocks. Opposition leaders quickly seized on the decline, framing it as evidence that investors were unconvinced by the government’s proposals on growth, employment and household relief. Sanyal rejected that interpretation, saying markets frequently reassess budgets over weeks as analysts model tax changes, spending priorities and deficit paths.
“The initial reaction is never the full story,” Sanyal said, adding that budgets are complex documents whose implications unfold through implementation rather than headlines. He pointed to past instances where markets dipped immediately after major fiscal announcements only to stabilise once clarity emerged on execution and macro conditions.
The Economic Advisor underlined that the budget needs to be assessed against the government’s broader economic objectives, including fiscal consolidation, infrastructure investment and long-term productivity gains. He said the administration led by Narendra Modi remains committed to balancing growth support with debt sustainability, a trade-off closely watched by ratings agencies and global investors.
Sunday’s market reaction came amid global uncertainty over interest rate trajectories, commodity prices and capital flows to emerging economies. Analysts noted that such external factors often amplify domestic news, especially when investors have already built expectations ahead of a budget. When those expectations are not immediately met, even if policy direction remains intact, markets can correct sharply.
Sitharaman’s budget outlined continued emphasis on public capital expenditure, targeted welfare schemes and a glide path for deficit reduction. While it did not announce sweeping tax cuts or stimulus measures, the finance minister argued that steady investment-led growth would deliver durable gains. Government officials said this approach reflects lessons from earlier cycles where aggressive fiscal expansion strained public finances without guaranteeing sustained job creation.
Opposition parties criticised the budget for what they described as inadequate relief for households facing high living costs and for insufficient support to small businesses. They also highlighted the timing of the market fall to reinforce their narrative of economic dissatisfaction. Sanyal said such political readings of market behaviour overlook how traders respond to liquidity conditions, derivative positions and algorithmic strategies in the hours after a budget speech.
Market participants themselves offered mixed assessments. Some fund managers said the absence of dramatic announcements reduced near-term catalysts for a rally, prompting profit-taking after a strong pre-budget run-up. Others pointed out that bond yields and currency movements remained relatively orderly, suggesting no broad loss of confidence in fiscal management.
Economists tracking budget outcomes stressed that investor judgement tends to crystallise as data on government spending, tax collections and private investment emerge over subsequent quarters. Corporate earnings guidance, project awards and credit growth often provide clearer signals than an immediate index move. In that context, Sunday’s sell-off was seen by several analysts as a recalibration rather than a verdict.
Sanyal also cautioned against equating market performance with public welfare, noting that budgets are designed to address structural priorities beyond short-term equity returns. He said infrastructure creation, digital public goods and human capital investment may not trigger instant market enthusiasm but can lift potential growth over time.