- Monday, March 03, 2025
The Budget will have to address several challenges, including softening economic growth, falling rupee and moderation in consumption demand
By: India Weekly
FINANCE MINISTER Nirmala Sitharaman, set to make history with her eighth consecutive Union Budget, has worked tirelessly with key officials to prepare a budget of over ₹50 trillion (£463.98bn) for FY26.
The Budget will have to address several challenges, including softening economic growth, falling value of Rupee against the US dollar and moderation in consumption demand.
The economic growth is estimated to slow to a 4-year low of 6.4 per cent in FY25. This is the lowest growth since the outbreak of the COVID pandemic which hit the world in 2019.
Sitharaman, who had steered the Indian economy through many difficult phases, including once-in-a-century pandemic, is again confronted with economic deceleration, stagnant private investment, and an uncertain geopolitical situation.
On account of various factors, the rupee plunged to an all-time low of 86.7 per US dollar earlier this month.
The uphill task before the finance minister and her team would be to bolster growth without sacrificing fiscal prudence.
The government is also expected to stick to the fiscal glide path of reducing the fiscal deficit to below 4.5 per cent of Gross Domestic Product (GDP) in FY26 amidst various headwinds.
The Economic Survey prepared by chief economic advisor V Anantha Nageswaran is scheduled to be tabled in Parliament on January 31.
The survey will give detailed analysis of the state of economy and some of his suggestions to make India Viksit Bharat by 2047.
Here are the key numbers to watch out for in the Union Budget for 2025-26:
Fiscal Deficit: The budgeted fiscal deficit, which is the difference between the government expenditure and income, for the current fiscal (April 2024 to March 2025 or FY’25) is estimated at 4.9 per cent of GDP.
As per the fiscal consolidation roadmap, the deficit is to be brought down to 4.5 per cent of GDP in FY26. Markets will keenly watch for the deficit number in FY ’26 Budget.
Capital Expenditure: The government’s planned capital expenditure for this fiscal year is budgeted at ₹11.1 trillion.
However, slower government spending in the first four months due to Lok Sabha elections delayed the capex cycle and the final numbers for current fiscal are expected to be lower than Budgeted. The capex momentum is expected to continue in FY ’26 Budget as well.
Debt Roadmap: The finance minister, in her 2024-25 budget speech, had stated that from 2026-27 onwards the endeavour of fiscal policy would be to maintain the fiscal deficit in a way that the central government debt is on a declining path as a percentage of GDP.
Markets would closely look for the debt consolidation roadmap from FY ’27 onwards to see when the finance minister sees general government debt-to-GDP fall to the 60 per cent target. The general government debt-to-GDP ratio was 85 per cent in 2024, which included central government debt of 57 per cent.
Borrowing: The government’s gross borrowing Budget was ₹14.01 trillion in FY’25. The government borrows from the market to fund its fiscal deficit.
The borrowing number will be watched by the market, especially on the back of lower dividend from the RBI in FY’26 compared to Rs 2.11 lakh crore in FY’25.
Tax Revenue: The 2024-25 Budget had pegged gross tax revenue at ₹38.40 trillion, an 11.72 per cent growth over FY’24.
This includes ₹22.07 trillion estimated to come from direct taxes (personal income tax + corporate tax), and ₹16.33 trillion from indirect taxes (customs + excise duty + GST).
GST: Goods and Services Tax (GST) collection in 2024-25 is estimated to rise 11 per cent to ₹10.62 trillion. FY ’26 GST revenue projections will be watched as the revenue growth has slowed over the last three month in the current fiscal.
Nominal GDP: India’s nominal GDP growth (real GDP plus inflation) in FY’25 is estimated to be 10.5 per cent, while the Real GDP growth estimated by NSO is 6.4 per cent. FY’26 nominal GDP growth projections in the Budget will give an idea about the inflation trajectory in the next fiscal.
Dividend: The Government estimated ₹2.33 trillion from RBI and financial institutions and ₹562.60 billion from CPSEs as dividend in FY ’25.
These two key non-tax revenue numbers will be looked for in FY’26 Budget projections.
Disinvestment & Asset Monetisation: ‘Miscellaneous Capital Receipts’ – which include proceeds from disinvestment and asset monetisation, – was pegged at ₹500 billion in FY ’25 Budget. The FY’26 Budget will give a number for next year and a broader asset monetisation roadmap.
Welfare expenditure: Spotlight would also be on spending on key schemes like NREGA as well as key sectors like health and education. (PTI)
