Growth-focused, Fiscally Responsible and Inclusive

Budget 2025-26 placed by the Finance Minister amidst the global uncertainty unleashed by the likely global tariff war leading to the compression of global trade after the change of power in the USA.

- ABHAY DANDWATE

The Union Budget presented by the Finance Minister on February 1 has balanced the twin objectives of fiscal discipline and giving growth a directional push through targeted measures. It is a forward-looking budget aimed at increasing consumption demand to further pump prime the GDP growth which in turn will increase tax revenue of the government. The budget has brought a slew of changes in IT slabs giving bonanza to much-awaited succour to the large population of the middle class particularly to the lower and middle tier of the Indian middle class eventually bolstering the consumption demand which was tepid for few years at the cost of giving up short term revenue loss of around Rs 1 lakh crore. The current strategy of the government to spur growth through an increase in domestic demand is imperative given the uncertainty looming large on exports due to the risk of a global tariff war.

The noteworthy feature of the budget is that, notwithstanding the large sops and concessions offered to the various strata of society and declaring a plethora of schemes to scale up growth over all fiscal discipline has been maintained.

The fiscal arithmetic is directionally moving toward fiscal consolidation and on the scheduled glide path by pegging fiscal deficit to 4.4 per cent in FY 2026 despite maintaining capital expenditure at the same level which can be attributed to the expected increase in tax revenue, estimated GDP growth of 6.4 per cent and expected large surplus dividend of Rs 3.25 lakh crore from Reserve Bank of India and PSU banks. The government lays down a new six-year road map to reduce the debt to GDP ratio on a declining path starting from 56 per cent in FY 2026 to 50 per cent plus minus one per cent by March 31. This approach would provide the government requisite operational flexibility to respond to unforeseen circumstances.