What to expect from the Union Budget?

A lot is expected in terms of measures to push for growth in consumption and investment. On the other hand, a more detailed look at expenditure would be in order

- MADAN SABNAVIS

THE BUDGET IS a statement of income and expenditure of the government just like the profit and loss of a company. But the thoughts that go into its formulation are important and spelled out in the Budget speech. Further, akin to a company's balance sheet is the government's liabilities schedule with debt statement being the critical component. While there may be limited flexibility in designing the Budget as almost all revenue components are contingent on the economy, governments do their best to provide incentives and support while drafting the document.

What can one expect from the Budget? These can be divided into three parts: macros, revenue, and expenditure. With macros, first priority is the fiscal deficit ratio target. The entire edifice is drawn up based on it, as there is a resolve to lower the ratio to 4.5% of GDP by FY26. With the revised deficit for FY25 expected to be 4.7-4.8%, a cut of 0.5% of GDP is likely this time.

Second is the assumed GDP growth rate. The first advance estimate for FY25 was relevant mainly to form the base for the Budget when targeting revenue numbers for FY26. The revised 9.8% for FY25, instead of 10.5%, will probably make the Budget take a conservative view of 10.5% for FY26. This will be the basis for calculating the tax revenue, normally taken as a proportion of this number. The ratio has been increasing in the last decade and a ratio of 12% can be expected this time.