What to expect from the Budget?

It would tend to focus more on being a policy tool to address concerns in the economy as well as foster measures to bring about growth

- MADAN SABNAVIS

WHEN THE UNION Budget is presented for FY27,it may at first appear to be a very normal exercise as the finance minister has already discussed the big announcements on taxation (including direct and indirect taxes) in the FY26 Budget preceding the festive season.

The income tax structure as well as goods and services tax (GST) slabs have been rationalised. It is unlikely that anything else can be done on these fronts this year.

There is a lot of talk about whether we should target the debt-to-GDP ratio or the fiscal deficit. It does not really matter because while the debt-to-GDP ratio is a goal to keep up with global prudence standards, the fiscal deficit ratio is the route to be taken—if the fiscal deficit progression is controlled, the debt-to-GDP ratio will come down automatically. If not, it is unlikely to decelerate as the redemption calendar is well-known and fixed. The goal is to reach the 3% mark. Covid -19 upset calculations, now being reversed as seen in the glide path.

A frequent issue is that with growth in nominal GDP being low, the ability to bring down the fiscal deficit ratio is constrained. That is a fair point because if the denominator of a ratio changes slowly while the numerator increases in the normal course, the ratio will tend to increase.