‘Fiscal prudence, not tax cuts, will shape growth and employment’

At the Mint Money Festival in Mumbai, an audience poll revealed that people are more concerned with the Union Budget creating jobs and improving the Centre’s fiscal health than delivering tax breaks.

- Shipra Singh

Monika Halan, founder, Dhan Chakra Financial Education, decoded the Budget for 2026 for households to explain what really matters for jobs, taxes, investments and long-term security. Edited excerpts from an interview.

It’s encouraging to see job growth and fiscal discipline rank above tax relief. Interestingly, both are closely related. On income tax, we saw significant relief last year. I wouldn't expect meaningful income tax cuts for the next 4-5 years, at least not until more jobs are formalised and a larger base of people begin paying taxes.

Fiscal discipline is fundamentally about how the Cen-tre manages its borrowing. We usually track two numbers: the fiscal and revenue deficit. Fiscal deficit is excess of government expenditure over revenue. But more important is what the Centre borrows for. It's similar to what we borrow for—to build a house or to go on a vacation. Similarly, if the Centre is borrowing to build roads, ports and capital assets, it is productive and the capital expenditure has a multiplier of around five to six. Whereas if the borrowing is done to fund subsidies or loan waivers, that comes out of the revenue expenditure and doesn’t generate long-term growth.

The ideal scenario is a fiscal deficit of around 3%, which is the FRBM (fiscal responsibility and budget management) target, with zero revenue deficit, meaning borrowing only for asset creation. It creates a positive growth loop, supports job creation. If the Centre borrows excessively, it crowds out private investment and without private investment, job growth remains muted. That's why fiscal prudence and employment are interconnected.