Union Budget

Subject: Economy | Unit: Fiscal Policy | Topic: Budget Exam: AP Group 2 (APPSC)

Introduction

The Union Budget is the most important annual financial document of the Government of India, presented under Article 112 of the Constitution as the "Annual Financial Statement." It lays out the government's revenue estimates, expenditure plans, and policy priorities for the coming financial year. Understanding budget components, deficit concepts, and key figures is fundamental for AP Group 2, as budget-related questions appear consistently across papers. The Union Budget 2025-26 projects total expenditure of Rs 50.65 lakh crore with a fiscal deficit target of 4.4% of GDP.

Economic Context

India's budget process has evolved significantly: the Railway Budget was merged with the Union Budget from 2017-18, the Plan/Non-Plan expenditure classification was discontinued from 2017-18, and the presentation date was moved from the last working day of February to 1 February (from 2017). The Finance Minister presents the Budget in Lok Sabha; Money Bills can only be introduced in Lok Sabha (Article 109), and Rajya Sabha can only suggest amendments within 14 days.

Core Content

Constitutional Framework

Budget Components — Receipts

Budget Components — Expenditure

Interest payments are the largest single item of revenue expenditure.

Budget Deficit Formulas

Critical formula: Fiscal Deficit = Total Borrowing Requirement = Net increase in government's debt

FRBM Act 2003

Union Budget 2025-26 — Key Figures

Budget 2025-26 — Key Announcements

Budget 2026-27 Targets

• Outstanding liabilities target: reduce to 50% of GDP by March 2031 (from ~56%)
• Fiscal deficit to continue declining year-on-year through FY 2030-31

Budget Process

1. Preparation starts 5-6 months before presentation
2. Finance Ministry's Budget Division coordinates with all ministries
3. Economic Survey presented one day before Budget
4. Budget goes through: general discussion → scrutiny by Departmental Standing Committees → voting on Demands for Grants → passing of Appropriation Bill and Finance Bill

AP Connection

AP Budget 2025-26

AP Budget 2026-27

Major AP budget allocations (2026-27): NTR Bharosa Pension Rs 27,719 crore, Talliki Vandanam Rs 9,407 crore (2025-26), Annadata Sukhibhava Rs 6,600 crore, Polavaram Rs 6,105 crore, Amaravati Rs 6,000 crore.

AP receives tax devolution from Centre as per 15th Finance Commission recommendations. The state has long demanded Special Category Status after bifurcation (2014).

Key Points Summary

1. Budget is the Annual Financial Statement under Article 112 of the Constitution
2. Money Bills can only be introduced in Lok Sabha (Article 109)
3. Consolidated Fund of India (Article 266): all government revenues and borrowings
4. Contingency Fund (Article 267): Rs 500 crore at President's disposal
5. Revenue Receipts = Tax Revenue + Non-Tax Revenue (do not create liability)
6. Capital Receipts = Borrowings + Disinvestment + Loan Recoveries (create liability or reduce assets)
7. Revenue Expenditure does NOT create assets; Capital Expenditure creates long-term assets
8. Interest payments are the largest single item of revenue expenditure
9. Fiscal Deficit = Total Expenditure - Total Receipts (excl. borrowings) = Total borrowing requirement
10. Primary Deficit = Fiscal Deficit - Interest Payments
11. Revenue Deficit = Revenue Expenditure - Revenue Receipts
12. FRBM Act 2003 targets fiscal consolidation; N.K. Singh Committee recommended 40% debt-to-GDP
13. Budget 2025-26: total expenditure Rs 50.65 lakh crore, fiscal deficit 4.4% of GDP
14. Capital expenditure Rs 11.21 lakh crore (3.1% of GDP)
15. Income up to Rs 12 lakh: zero tax under new regime (Budget 2025-26)
16. Railway Budget merged with Union Budget from 2017-18
17. Budget presentation moved to 1 February from 2017
18. AP fiscal deficit improving: 4.4% (2025-26) to 3.8% (2026-27) of GSDP

Exam Strategy

Key Terms Glossary