The Capital Conflict
Analyzing Raghav Chadha’s "Good, Bad, and Way Forward" Budget Critique
STT Reform
Hike on F&O (0.05% to 0.15%) to curb retail speculation.
LTCG Proposal
Push for 0% Individual LTCG to mimic Singapore/UAE models.
Crypto Stance
Formal VDA regulation to prevent ₹20,000Cr offshore flight.
Rural Crisis
Critical ₹53,000Cr cut in Agri/Rural spending flagged by Opposition.
In the hallowed halls of the Rajya Sabha, the debate over India’s 2026-27 Union Budget has shifted from mere bookkeeping to a fundamental philosophical clash over the future of Indian capital. AAP MP Raghav Chadha, delivering a speech titled "The Good, the Bad, and the Way Forward," presented a vision of a "pro-investor" India that stands in stark contrast to the current fiscal architecture. While the Treasury benches highlight a ₹53.47 lakh crore expenditure outlay, the discussion has been pierced by sharp critiques regarding the "over-taxation" of domestic wealth and the neglect of the rural backbone.
1. The Speculation Clampdown: STT vs. The Retail 'Gamble'
Chadha began by applauding the government’s move to increase the Securities Transaction Tax (STT) on Futures and Options (F&O). The logic is data-driven: nearly 90% of retail investors in the derivatives segment lose money, effectively turning the stock market into a high-stakes casino for the middle class. By raising STT on options premiums to 0.15%, the budget aims to "cool" an overheated speculative market.
Budget 2026: STT Rate Hikes
Comparison of Transaction Costs Pre and Post Budget 2026
2. The LTCG Paradox: Penalizing "Patient Capital"
The "Bad" in Chadha’s analysis centered on the 12.5% Long-Term Capital Gains (LTCG) tax. He argued that while the STT hike is a welcome deterrent for speculators, the simultaneous existence of high LTCG penalizes the very "patient capital" India needs. Chadha proposed a radical shift: Zero LTCG for individual investors.
By eliminating LTCG, Chadha posits that India could unlock billions in household savings, providing a domestic cushion against the volatile flight of Foreign Portfolio Investors (FPIs), who pulled out ₹1.6 lakh crore in late 2025.
3. Virtual Digital Assets: Regulate or Repudiate?
Addressing the elephant in the room—Cryptocurrency—Chadha urged the government to stop the "taxation without classification" approach. Currently, Virtual Digital Assets (VDAs) face a 30% flat tax plus 1% TDS, yet they remain in a regulatory grey zone. This lack of clarity has led to a massive migration of Indian capital and talent to offshore hubs like Dubai and Vietnam.
| Asset Class | Current Tax (2026-27) | Chadha's Proposal |
|---|---|---|
| Listed Equities (LTCG) | 12.5% (>1.25L) | 0% (For Individuals) |
| Derivatives (F&O) | 0.05% - 0.15% STT | Support Hike (Speculation Check) |
| Crypto / VDAs | 30% + 1% TDS | Regulated Asset Class + Compliance |
4. The Rural Dissent: Chidambaram’s Counter-Attack
The debate wasn't limited to the "financialized" economy. Senior Congress leader P. Chidambaram launched a scathing attack on the "cruel expenditure cuts" in the rural sector. While the government boasts of a 53 lakh crore budget, Chidambaram pointed to a ₹53,000 crore reduction in funds for agriculture and rural development. He questioned the "Viksit Bharat" narrative when capital expenditure (CapEx) as a percentage of GDP has effectively flatlined at 3.1%, down from 3.2% in the previous cycle.
Conclusion: The Way Forward
The 2026-27 Budget stands at a crossroads. The government’s focus is clearly on fiscal consolidation (targeting a 4.3% deficit) and formalization. However, as Raghav Chadha articulately argued, a nation cannot tax its way to prosperity by penalizing its domestic wealth creators. The "Way Forward" requires a structural pivot: rewarding long-term equity holding, providing regulatory guardrails for digital assets, and ensuring that the "Rural Engine" is not starved of fuel in the pursuit of fiscal optics.
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