Work-in-progress budget to keep the wheels oiled

n college exams, we used to have “continuation sheets”.

- Monika

While the markets have reacted negatively, it will be prudent to wait a while for the sentiment to reverse.

(PTI)

If you had too much to say, you asked for another sheaf of papers. Budget 2026 can be called a continuation budget. A work-in-progress budget. A plumbing budget. A more oiling-the-wheels effort rather than an express reform train.

The biggest worry this financial year was the pressure on the fiscal deficit. The 21 trillion of income-tax relief given in Budget 2025-26 plus the %48,000-crore GST giveaway was poised to derail the budget estimates. But what made the story worse was a gross domestic product (GDP) deflator of just 0.5%. This measures the impact of inflation on real GDP and the trend line has been around 3.5%. While real GDP is of interest to macroeconomists, it is the nominal GDP that reflects on corporate bottom lines and tax revenue toplines. It is not surprising that the revised estimates for the year on personal income taxes and GST are both lower than the estimates. But higher corporate, customs, and excise taxes, and dividends and profits have saved the day, keeping the fiscal deficit (expenditure minus revenue) at a commendable 4.4%. The estimate for the next year is a very minor contraction to 4.3% — this number will finally filter down into the markets who might feel happier on Monday than they did on Sunday.