Finance Minister Nirmala Sitharaman is set to present her eighth consecutive Union Budget, with expectations high for potential tax relief for the middle class. The Budget, which will continue in a paperless format, will also focus on fiscal consolidation, borrowing plans, and capital expenditure to drive economic growth.

Fiscal Deficit and Borrowing

The government's fiscal deficit for the current financial year (FY'25) is estimated at "4.9% of GDP," with a target to bring it down to "4.5% in FY'26" as part of the fiscal consolidation roadmap. Markets will be closely watching the government’s borrowing plans, particularly as the Reserve Bank of India's dividend payout is expected to be lower in FY'26 compared to "Rs 2.11 lakh crore in FY'25." Gross borrowing for FY'25 stands at "Rs 14.01 lakh crore."

Capital Expenditure and Growth

The government had budgeted "Rs 11.1 lakh crore" for capital expenditure in FY'25, but spending slowed in the first four months due to the general elections. The upcoming Budget is expected to reinforce the capex momentum for FY'26.

Debt Consolidation Plan

With the general government debt-to-GDP ratio at "85% in 2024," the government aims to set a clear roadmap for bringing it down to "60% in the long term." The finance minister is expected to outline a strategy for fiscal deficit reduction from "FY'27 onwards."

Tax Revenue and GST Collections

For FY'25, the government had pegged gross tax revenue at "Rs 38.40 lakh crore," with "Rs 22.07 lakh crore from direct taxes" (income and corporate tax) and "Rs 16.33 lakh crore from indirect taxes" (GST, customs, excise). GST revenue was expected to grow "11% to Rs 10.62 lakh crore," but recent months have seen slower growth, making FY'26 projections crucial.

GDP Growth Outlook

India’s "nominal GDP" growth for FY'25 is projected at "10.5%," with "real GDP growth at 6.4%," as estimated by the National Statistical Office (NSO). The upcoming Budget’s nominal GDP forecast will provide insights into inflation trends and economic growth for FY'26.

Non-Tax Revenue and Disinvestment Plans

The government had estimated "Rs 2.33 lakh crore in dividends" from the RBI and financial institutions, alongside "Rs 56,260 crore from CPSEs" in FY'25. The Budget will reveal fresh estimates for FY'26. Disinvestment and asset monetisation proceeds, projected at "Rs 50,000 crore" in FY'25, will also be a key focus.

Spending on Key Sectors

The Budget is expected to outline allocations for crucial welfare programs like "NREGA," as well as funding for "health and education sectors," which will be closely scrutinized.

With economic growth, fiscal prudence, and revenue generation in focus, Sitharaman’s Budget for "FY 2025-26" will set the course for India’s financial roadmap in the coming year.