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Union Budget 2025: Finding a balance between growth and fiscal consolidation

The emphasis is still on finding a delicate balance between budgetary austerity and economic growth as India prepares to publish the Union Budget for FY26. Prudent fiscal management without slowing growth momentum is required to meet the government's ambitious goal of bringing the fiscal deficit down to less than 4.5% of GDP by FY26. This budget will be crucial in determining India's economic course against the backdrop of slowing domestic economic growth (5.4% in Q2-FY25 vs. 6.8% RBI estimate), a declining currency, and international concerns. Government Spending: Using Capital Investments to Maintain Growth India's growing reliance on capital spending to propel long-term economic growth has been one of the country's defining fiscal policy trends; its proportion of total expenditures has gradually grown from 20.7% in FY16 to 31.5% in FY25 (BE). The central government has demonstrated its commitment to infrastructure-led growth by increasing its capital spending on infrastructure during the last ten years, from Rs 1.97 lakh crore (1.6% of GDP) in FY15 to Rs 11.1 lakh crore (3.4% of GDP) in FY25 (BE). The entire capital expenditure increases to about Rs 15 lakh crore when central government funds are taken into account.

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