The Union Budget 2025-26: Through a crystal ball

Not an easy task balancing concerns over the emerging economic slowdown with building an inclusive economy.

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Budget-making by its very nature is a delicate art-one that requires navigating disparate situations and making tough choices among a myriad set of priorities. In India, the budget-framing by the Union holds even greater significance, given the Centre's dominance over public resources and the expectation of it serving as a flag bearer for ushering changes in the entire nation's public policy. Three years after the Covid-19 pandemic, Nirmala Sitharaman, the accomplished Finance Minister, now faces the critical task of not only preventing an economic slowdown but also restoring the economy's previous momentum and ensuring it operates at full potential.

In India, the budget-framing by the Union holds even greater significance, given the Centre's dominance over public resources and the expectation of it serving as a flag bearer for ushering changes in the entire nation's public policy. Three years after the Covid-19 pandemic, Nirmala Sitharaman, the accomplished Finance Minister, now faces the critical task of not only preventing an economic slowdown but also restoring the economy's previous momentum and ensuring it operates at full potential.

In this challenging environment, the prominent tailwinds are the improved revenue collections from direct taxes (a 12% rise over the previous year, more than the estimated), a satisfactory monsoon (in 80% of the weather zones), and the higher-than-ever likelihood of the ongoing conflicts in Ukraine and Gaza ending.

The consequential likely step-up in global trade and the possibility of increased capital flows and technologies across borders, could result in elevated economic activity in India as well.

Together, such "positives" would favourably impact its public revenue.