Government to prioritise growth and fiscal discipline in Budget 2025-26
With a fiscal deficit target of 4.5% of GDP, the government aims to maximise growth while maintaining fiscal discipline.
Nirmala Sitharaman presenting the budget (File photo)
Guwahati, Jan 28: The Union Budget 2025-26, set to be presented on February 1, is expected to focus on boosting economic growth through mild cuts in personal income tax rates and concessional corporate tax schemes for manufacturing hubs and FDIs, according to a report by Emkay Global Financial Services.
These measures align with the government’s 'Make in India' strategy and aim to increase disposable income for the middle-income group.
The report highlights possible higher import tariffs on China-sensitive products and reduced customs duties on industrial intermediaries. A hike in customs duty on gold and eased FDI norms are also anticipated.
The government’s fiscal deficit for FY25 stood at 4.7% of GDP, lower than the revised estimate of 4.9%, thanks to robust personal income tax collections. For FY26, the fiscal deficit target is set at 4.5% of GDP, maintaining the fiscal discipline seen in recent years.
Net government borrowing for FY26 is projected at ₹11.15 lakh crore, lower than FY25, with 24% of the fiscal deficit likely funded by small savings. The report also expects an RBI dividend of ₹2.1 lakh crore, similar to FY25.
Spending priorities include rural welfare, affordable housing, MSMEs, human capital (health and education), and agriculture, which have high fiscal multipliers. Defence allocation is expected to see the largest increase, with capex loans to states remaining similar to FY25.
Additionally, the government is expected to focus on functional infrastructure monetisation, strategic disinvestment, and better resource allocation to ensure deficit consolidation with minimal growth impact.
The budget will also aim to maximise fiscal impulse, improve investment dynamics, and support vulnerable segments of the economy, according to the report.