Union Budget will balance fiscal consolidation and growth; Capital expenditure likely to rise to Rs11-11.5 lakh cr: Report - World News Network

New Delhi [India], January 22 (ANI): The Union Budget for the fiscal year 2025-26, to be presented on February 1, 2025, is expected to strike a delicate balance between fiscal consolidation and growth-oriented measures, according to a Bank of Baroda report.
To encourage private investments, the government is likely to increase its capital expenditure to Rs11-11.5 lakh crore in FY26, up from Rs10 lakh crore in FY25.
Despite headwinds from slowing global growth, a stronger US dollar, and potential tariff threats by President-elect Donald Trump, the government aims to ensure India’s growth trajectory remains resilient.
Key priorities include boosting domestic consumption, fostering private investments, and continuing flagship schemes such as PM-KISAN, MGNREGA, and Housing for All.
With an anticipated fiscal deficit reduction to 4.3-4.4 per cent of GDP in FY26 from 4.8-4.9 per cent in FY25, the government demonstrates a firm commitment to fiscal prudence.
The report mentioned, “For the fiscal year 2025-26, Union budget will skilfully balance fiscal consolidation, and measures for advancing growth. We expect centre to achieve or maybe even undershoot (by ~10bps) its fiscal deficit target of 4.9 per cent ( per cent of GDP), owing to expected savings on the expenditure side.”
This fiscal room will be supported by a normalizing nominal GDP growth of 10.5 per cent and stable revenue growth driven by revived consumption and rationalized subsidies.
The quality of expenditure will remain a focus, ensuring funds are allocated to enhance infrastructure, social schemes, and skilling programs.
Amid signs of moderation in real GDP growth and urban consumption, the budget is expected to prioritize both rural and urban growth.
Enhanced allocations for schemes like MGNREGA, PM-KISAN, and affordable housing are anticipated to support these goals.
The budget may also introduce new initiatives such as a Production Linked Incentive (PLI) scheme for MSMEs, increased funding for the Skill India program, and expanded infrastructure for electric vehicle (EV) charging and agricultural warehousing.
Tax incentives, such as higher standard deductions, increased limits under sections 80C and 80D, and measures to promote sustainable tourism and reduce customs duties, are also on the agenda.
While the overall subsidy burden is expected to decline slightly in FY26, food and fertilizer subsidies will remain significant to protect farmers and consumers.
The subsidy allocation is projected to reduce to Rs4 lakh crore from Rs4.2 lakh crore in FY25, with savings primarily from food subsidies. Despite higher costs for fertilizer imports due to a stronger dollar, the government aims to stabilize retail prices.
Revenue receipts are expected to stabilize in FY26, supported by buoyant indirect tax collections, particularly GST. Direct tax collections, however, may see slower growth due to subdued corporate tax receipts. Non-tax revenues, including the surplus transfer from the RBI, will continue to provide critical fiscal support.
The government is likely to keep its borrowing program relatively steady, with gross borrowing for FY26 projected at Rs15 lakh crore.
Net borrowing is expected to ease to Rs10.8 lakh crore, supported by savings from lower expenditure. With the Reserve Bank of India (RBI) anticipated to begin a rate-cutting cycle in FY26, lower bond yields and deposit rates will further help reduce the debt burden.
Capital expenditure will remain a cornerstone of the budget, aimed at driving investments in infrastructure, health, education, and space technology.
The government plans to invest significantly in projects such as ports, railways, roads, and renewable energy, aligning with its vision of “Viksit Bharat.”
Revenue expenditure is also expected to grow modestly, driven by higher allocations for schemes like PM-Awas Yojana and MGNREGA. (ANI)

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