New Delhi,jan 22
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.
