The Union government has kicked off its formal pre-Budget meetings with different groups of experts and stakeholders. For a variety of reasons, there is an air of expectancy around the Union Budget for 2026-27, which Finance Minister Nirmala Sitharaman will present in February 2026. Or will she present it in January 2026? There is a reason for this doubt.
Since 2017, when the date for presenting the Union Budget was advanced to February 1, this will be the first time it falls on a Sunday. When Union Budgets used to be presented on the last day of February, the convention was that if February 28 or 29 fell on a Sunday, the previous day (Saturday) would be chosen for presenting the Budget. There have been only two exceptions in the last 79 Union Budgets since 1947, when the last day of February fell on a Sunday, but the finance minister concerned decided to advance the presentation of the Budget to Friday. On all other occasions, when the last day of February fell on a Sunday, the Budget was presented on the previous day, Saturday.
Sitharaman, therefore, has to decide whether she will opt for the past convention or create a new one while presenting the 80th Budget of India since Independence. If she settles for the past convention, she will be presenting the Budget for 2026-27 on January 31, even though it would be a Saturday. Otherwise, she could do it on February 2, 2026.
The dilemma over the date of presentation aside, there is yet another reason why Sitharaman’s forthcoming Budget will be treated as a major event of historical significance. For the eighth time running, Sitharaman will be rising in the Lok Sabha to present the Union government’s full Budget or the Annual Financial Statement. With that, she will be on a par with Morarji Desai, who till now holds the record of presenting eight full Budgets, although in two different stints — one under Prime Minister Jawaharlal Nehru and the other under his daughter, Indira Gandhi. Sitharaman will achieve that record under one Prime Minister, Narendra Modi, and under two consecutive governments.
Desai’s eighth Budget is remembered for the introduction of ad valorem excise duty rates on a large number of items, widening the scope of wealth tax and making financial allocation for the launch of the Fourth Five-year Plan after a Plan holiday of about three years. But a bigger drama unfolded about four and a half months after his eighth Budget. Indira Gandhi decided to ease Desai out of the finance ministry, which eventually led to his exit from the government, even as she executed her long-cherished plan for nationalising 14 banks.
In contrast, there are no such concerns for Sitharaman. With a major rationalisation of the goods and services tax (GST) regime, preceded by a big income-tax relief to middle-class Indians, she is on a high that few finance ministers have experienced after having spent over six and a half years in that job. Her performance on the fiscal consolidation front has been creditable — having brought the fiscal deficit down from a high of 9.2 per cent of gross domestic product (GDP) during the Covid year of 2020-21 to 4.7 per cent in 2024-25. In banishing the ghost of off-budget borrowings, she has set a new standard for fiscal transparency. And she has significantly improved the quality of government expenditure by boosting capital expenditure to 3.2 per cent of GDP last year even as the revenue deficit was brought down to 1.7 per cent of GDP.
So, what are the challenges she faces in the current year and what goals she should set for 2026-27?
In the first six months of 2025-26, net tax revenue has underperformed, falling by 3 per cent against the annual target of growing by 13 per cent over 2024-25. Meeting this shortfall will require net tax revenue to grow by about 30 per cent in the second half of 2025-26, achieving which will be difficult if not impossible. Non-tax revenue and receipt from asset monetisation have done well, but these gains would not be enough to make good the shortfall in net tax revenue.
There will be some solace from the relatively slow pace of revenue expenditure in April-September 2025, which grew by just 1.5 per cent, against the annual growth projection of about 9 per cent. In contrast, capital expenditure in the first half of the current year was frontloaded in a big way, notching up an increase of over 40 per cent, and the government can afford to slow it down in the second half. Even if there is a 15 per cent fall in capex during October-March 2025-26, the overall target under this head will be met.
Barring her first two Budgets, Sitharaman has always ended the year with either a lower fiscal deficit figure than what she had projected or by adhering to the target. It is this track record that, among other things, has helped improve India’s overall rating by international agencies. It is, therefore, unlikely that the finance minister will allow the deficit target of 4.4 per cent of GDP for 2025-26 to be breached. The only imponderable in this task is how the government’s net tax revenue will fare in the second half, after the GST rejig.
The last two years have seen the actual net tax revenue fall below the Budget Estimate. What helped Sitharaman in this period to improve her performance on deficit reduction were a curtailment of revenue expenditure and higher nominal economic growth. In the current year, actual nominal growth may disappoint, with a number lower than the budgeted 10.1 per cent. The only recourse is a further squeeze on revenue expenditure. How difficult that task will be depends on the actual impact of the Eighth Central Pay Commission’s recommendations on wages of government employees, even though it may be felt retrospectively. In sum, meeting the fiscal deficit target this year will be a difficult task.
For 2026-27, the challenges will be even more complex and bigger. The Sixteenth Finance Commission’s recommendations on sharing of resources with the states will have to be implemented. Uncertainties in the global economy and India’s economic challenges as a result will only become more formidable. The best course for the government at this time would be to tighten the seat belt a little more, without compromising on its investments in creating better infrastructure and giving a push to privatisation. In other words, a tight vigil on the fiscal consolidation plan without compromising on capex is all the more necessary as the country navigates these uncertain times.
Returning to the date when Sitharaman may choose to present her eighth Budget, it will be useful to remember that if she decides to present it on January 31, she may corner yet another record for herself. No finance minister in India has ever presented a full Budget in the month of January!
AK Bhattacharya is the Editorial Director, Business Standard. He tweets @AshokAkaybee. Views are personal.