Budget 2025-26: FM Presents A Record Budget Of Rs 50.65 Lakh Crore, Fiscal Deficit At 4.4% Of GDP

Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 in the Lok Sabha on Saturday.

By Krishnanand

New Delhi:Finance Minister Nirmala Sitharaman Saturday presented a record budget of more than Rs 50 lakh crores (INR 50,65,345 crores) for the next financial year beginning on April 1, an increase of nearly Rs 3.49 lakh crores or over 7.3 per cent over the revised estimates for the current financial year’s budget which has been estimated at Rs 47,16,487 crores.

It means that the government proposes to spend over 50.65 over the next 12 months beginning in April this year on various development and welfare-related schemes and also in payment of salary, pension and wages, including on its other liabilities such as interest payment etcetera on the loans taken by the government earlier.

Under Article 112 of the Indian Constitution, the Union Government is required to present estimates of its total expenditure and receipts for a financial year to the Parliament which is known as the Annual Financial Statement (AFS) or the Union Budget.

How does the FM propose to fund this huge amount?

There are three key sources of government expenditure funding. First source is taxes and duties which include both direct and indirect taxes such as income tax, corporate tax, GST, customs and excise duties. The second source is the loans to be taken by the government, this is the second biggest source of budget funding after the taxes and duties, the third source is non-tax revenue of the Centre such as dividends and profits from the public sector undertakings, and recovery of loans.

Of the three main sources of the budget funding, more than 28.37 lakh crores of the total requirement of 50.65 lakh crore rupees, or some 56 per cent will come from the government’s own taxes and revenues.

Nearly one-third budget will be financed through loans

However, in a worrying trend, some 31 per cent or more than Rs 15.69 lakh crore will be arranged by borrowing money from markets and other sources. In other words, in order to meet nearly one-third of the proposed budgeted expenditure of Rs 50.65 lakh crore will be arranged by the government by taking loans.

Fiscal Deficit is the difference between total budgeted expenditure of the central government and its total receipts, excluding debt-capital receipts. It is reflective of the total borrowing requirement of the Government. In other words, the total borrowing requirement of the Centre in a year are called fiscal deficit and it is given in the budget documents as a per cent of the country’s gross domestic production (GDP) of the goods and services, and also in absolute numbers.

This is crucial as a higher fiscal deficit represents a weak state of the government finances. Finance Minister Sitharaman has estimated that the fiscal deficit of the Centre would be 4.4 per cent of the GDP in the next financial year (FY 2025-26).

For calculating the fiscal deficit for the next fiscal year, the finance minister has projected a nominal GDP growth of 10.1 per cent in the next financial year.

Her projection of 10.1 nominal growth next year is based on the second revised estimate released by the National Statistical Office (NSO) for the FY 2024-25 GDP at Rs 324 lakh crores. Accordingly, the government has estimated nominal GDP for the next year at Rs 357 lakh crores.

It means if all goes as per the projections made by the finance minister then the fiscal deficit will be capped at 4.4 per cent of the GDP in the next fiscal.

Actual fiscal deficit for FY 2023-24 was Rs 16.54 lakh crores (5.6% of the GDP), while as per the revised estimates given today, the fiscal deficit for the current financial year is expected to come down to 4.8 per cent of the GDP at Rs 15.7 lakh crores.

Trends in budgeted expenditure in the last two years

For the ongoing financial year (FY 2024-25), Finance Minister Sitharaman has projected a total budgeted expenditure of over Rs 48 lakh crore (Rs 48,20,512 crore). However, the latest data of the revised estimate suggest a declining trend in government expenditure this year.

According to the latest budget data, the government expenditure is expected to come down to Rs 47 lakh crores (Rs 47,16,487 crores), a decline of over Rs 1.04 lakh crores or a decline from the budget estimate presented in July last year.

In FY 2023-24, the central government’s actual budgeted expenditure was over Rs 44.43 lakh crores (Rs 44,43,447 crores).

It means the Centre’s total budgeted expenditure increased by Rs 2.73 lakh crores (Rs 2,73,040 crores) between FY 2023-24 and 2024-25 (RE), a growth of more than 6 per cent. However, the Finance Minister is more optimistic in her budget projections as she has projected a growth of over 7 per cent in the central government’s total budgeted expenditure.

According to the budget estimate for the next financial year, the government would spend an additional Rs 3.49 lakh crore over its total budgeted expenditure for the ongoing financial year ending on March 31 this year.