New Delhi, Feb 1 (PTI) Finance Minister Nirmala Sitharaman is set to present her record ninth consecutive Union Budget, with all eyes eagerly awaiting significant customs reforms and key fiscal indicators. This milestone budget follows her symbolic shift in 2019, when she replaced the traditional leather briefcase with a red cloth-wrapped 'bahi-khata', and continues the paperless format adopted over the past four years.
Fiscal Deficit and Debt Consolidation
The budgeted fiscal deficit for the current fiscal year (FY26) is estimated at 4.4 percent of GDP, marking a notable achievement in fiscal consolidation as it stays below the 4.5 percent threshold. Markets are keenly anticipating the government's direction on reducing the debt-to-GDP ratio in the FY27 Budget. There is widespread expectation that the finance minister may announce a fiscal deficit target of 4 percent of GDP for the upcoming financial year, further solidifying the fiscal roadmap.
Capital Expenditure Focus
Planned capital expenditure for FY26 is budgeted at ₹11.2 lakh crore, with the government likely to maintain its strong emphasis on infrastructure spending. Analysts predict a 10-15 percent increase in the capex target for FY27, potentially exceeding ₹12 lakh crore. This focus comes as private sector investment remains cautious, and the government aims to leverage available fiscal space before pay revisions in FY28 limit other expenditures.
Debt Roadmap and Borrowing
In her 2024-25 budget speech, Sitharaman emphasized that fiscal policy from 2026-27 would aim to keep the fiscal deficit on a path that reduces central government debt as a percentage of GDP. Markets will closely scrutinize the debt consolidation roadmap, particularly the timeline for achieving the 60 percent general government debt-to-GDP target. Current estimates place this ratio above 85 percent in 2025, with central government debt around 55 percent. Gross borrowing, set at ₹14.80 lakh crore for FY26, will be a key indicator of fiscal health and revenue trends.
Tax Revenue and GST Projections
Gross tax revenues for 2025-26 are pegged at ₹42.70 lakh crore, reflecting an 11 percent growth over FY25. This includes ₹25.20 lakh crore from direct taxes and ₹17.5 lakh crore from indirect taxes. GST collections are estimated to rise 11 percent to ₹11.78 lakh crore in FY26, with FY27 projections under close watch as rate reductions since September 2025 are expected to boost revenue momentum.
Nominal GDP and Dividend Income
Nominal GDP growth for FY26 was initially estimated at 10.1 percent but revised downward to 8 percent due to lower-than-expected inflation. The FY27 nominal GDP projection in the Budget will provide insights into the inflation trajectory, with estimates suggesting a range of 10.5 to 11 percent. Dividend income is another critical area, with the government estimating ₹1.50 lakh crore, including ₹1.02 lakh crore from RBI and financial institutions. Given higher RBI dividends of ₹2.69 lakh crore in FY26, revised figures and tax revenue impacts will be closely monitored.
Subsidies and Sectoral Spending
Subsidies for FY26 are earmarked at ₹3.83 lakh crore, including up to ₹2.03 lakh crore for food subsidy. The Budget will also spotlight spending on key schemes like VBG RAM G and sectors such as health and education, highlighting the government's priorities for inclusive growth.
As Sitharaman unveils this historic budget, stakeholders across India await detailed reforms and fiscal strategies that will shape the economic landscape for the coming year.
