February 1 Budget Expected to Highlight Fiscal Consolidation Amid Tax Revenue Challenges

India’s Union Budget, scheduled for February 1, 2026, is set to emphasize fiscal discipline while balancing growth priorities. According to economists polled by Reuters and reports from HSBC, the government will continue on its fiscal consolidation roadmap, even as tax revenues remain under pressure.

Key Highlights:

• Fiscal Deficit Target: The Centre aims to meet its FY26 fiscal deficit goal of 4.4% of GDP, signaling commitment to long-term stability.
• Revenue Challenges: Slower revenue growth, largely due to recent tax cuts, has left limited fiscal space.
• Spending Adjustments: Economists expect spending cuts in certain areas, with reliance on RBI dividend transfers to bridge gaps.
• Capital Expenditure: Despite constraints, capital spending is projected to rise, supporting infrastructure and growth momentum.
• Borrowing Outlook: Net borrowing is expected to remain steady at around ₹11.5 trillion in FY27, keeping debt costs manageable.
• State Governments’ Role: Some fiscal burden may shift to states, requiring coordinated fiscal management.

This budget will be closely watched for how it balances reform measures with fiscal restraint, reinforcing India’s credibility in global markets while sustaining growth.

Sources: Reuters, ETCFO, HSBC Report, Fortune India