"Union Budget FY26 fiscal targets and structural gaps examined"
Fiscal consolidation
the process of reducing government deficit as a share of GDP over time
Tax buoyancy
ratio of percentage change in tax revenue to percentage change in nominal GDP
The Union Budget is the government's annual financial statement under Article 112 of the Constitution. It presents the estimated receipts and expenditure for the coming financial year. The Budget has two broad components: the revenue account (current receipts and spending) and the capital account (borrowings, asset creation, and loans). The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 mandates a glide path for reducing the fiscal deficit, which is the gap between total expenditure and total receipts excluding borrowings. Fiscal consolidation, the process of reducing this deficit as a share of GDP, is a central objective of medium-term fiscal policy.
Tax buoyancy measures how responsive tax revenues are to economic growth. A buoyancy of 1 means revenues grow at the same pace as nominal GDP. When the government cuts tax rates or widens exemptions, short-term buoyancy falls even if the long-term goal is to expand the tax base. The tension between revenue sacrifice today and base expansion tomorrow is a recurring theme in Indian fiscal policy. The Economic Survey, presented a day before the Budget, provides the analytical backdrop against which Budget proposals are assessed.
India's fiscal architecture also rests on non-tax receipts, dividends from the Reserve Bank of India, public sector undertaking dividends, and proceeds from asset monetisation. These are non-recurring in nature and cannot substitute for structural tax revenue over multiple years. The National Monetisation Pipeline (NMP), launched for 2021-25, was the first systematic attempt to unlock value from public assets. The Budget for FY26 announced a second asset monetisation plan covering 2025-30.
The fiscal consolidation target of 4.4% of GDP for FY26 rests on two revenue assumptions that deserve scrutiny. First, total tax revenues are projected to grow at 11.2% over FY25 estimates. Second, income tax revenues are projected to grow at 14.4%. Both projections are set against a backdrop of significant tax concessions: incomes up to ₹12 lakh are effectively exempt from personal income tax under the new regime after factoring in the rebate, at a foregone revenue cost of ₹1 lakh crore. Achieving double-digit revenue growth while simultaneously reducing the tax burden requires either a sharp expansion of the tax base or a significant improvement in compliance, neither of which is guaranteed in the short term.
Net market borrowings of ₹11.54 lakh crore carry a crowding-out risk. When the government borrows heavily from the same pool of domestic savings that private firms draw on, it can push up interest rates and reduce the credit available to businesses. …
With reference to Union Budget, consider the following statements:
1.The Union Finance Minister on behalf of the Prime Minister lays the Annual Financial Statement before both the Houses of Parliament.
2.At the Union level, no demand for a grant can be made except on the recommendation of the President of India.
Which of the statements given above is/are correct?
Which of the following is/are included in the capital budget of the Government of India?
1.Expenditure on acquisition of assets like roads, buildings, machinery, etc.
2.Loans received from foreign governments
3.Loans and advances granted to the States and Union Territories
Select the correct answer using the code given below.
With reference to the Union Government, consider the following statements:
1.The Department of Revenue is responsible for the preparation of Union Budget that is presented to the Parliament.
2.No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India.
3.All the disbursements made from Public Account also need the authorization from the Parliament of India.
Which of the statements given above is/are correct?
One of the intended objectives of the Union Budget 2017-18 is to 'transform, energise and clean India'. Analyse the measures proposed in the Budget 2017-18 to achieve the objective.
Consider the following statements with reference to the Union Budget for FY2025-26:
1.The fiscal deficit target is set at 4.4% of GDP.
2.Net market borrowings are estimated at ₹11.54 lakh crore.
3.Incomes up to ₹10 lakh are effectively exempt from personal income tax under the new regime after the rebate.
4.The foregone direct tax revenue on account of income tax relief is estimated at ₹1 lakh crore.
How many of the above statements are correct?
Consider the following statements regarding India's manufacturing sector as highlighted in the Economic Survey 2024-25 and the Union Budget FY2025-26:
1.India's manufacturing sector accounts for approximately 17% of GDP.
2.India's industrial research and development spending stands at 0.64% of GDP.
3.The National Manufacturing Mission was launched to promote clean-tech manufacturing and ease of doing business.
4.MSME investment limits were increased by 5 times and turnover thresholds were tripled under the revised classification criteria.
Which of the statements given above is/are correct?
Match the following Union Budget FY2025-26 measures with their correct parameters:
List I (Measure) — List II (Parameter)
A.Kisan Credit Card loan limit (revised) — 1. ₹5 lakh
B.Effective income tax exemption threshold (new regime, after rebate) — 2. ₹12 lakh
C.Foregone direct tax revenue from income tax relief — 3. ₹1 lakh crore
D.Net market borrowings — 4. ₹11.54 lakh crore
Select the correct answer:
Consider the following statements regarding fiscal risks in the Union Budget FY2025-26:
1.A high level of net market borrowings by the government can crowd out private investment by tightening credit availability.
2.Asset monetisation receipts are recurring in nature and can substitute for structural tax revenue over multiple years.
3.The household savings rate in India declined to 18.4% of GDP in FY23, narrowing the domestic savings pool.
Which of the statements given above is/are correct?
With reference to the Union Budget FY2025-26, consider the following statements about agricultural measures:
1.The PM Dhan-Dhaanya Krishi Yojana targets interventions in 100 low-productivity districts.
2.The Kisan Credit Card loan limit was raised from ₹3 lakh to ₹5 lakh.
3.The Budget introduced concrete measures to promote agricultural exports, particularly in millets and natural farming.
Which of the statements given above is/are correct?
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