Finance Minister Nirmala Sitharaman delivered the Union Budget for the fiscal year 2026-27 on Sunday, 1 February, marking her ninth consecutive budget presentation. In a comprehensive speech, FM Sitharaman tabled a series of proposals aimed at bolstering key sectors including infrastructure, healthcare, education, and implementing various tax reforms.
Overview of Government Finances
The budget documents, spanning over 200 pages, provide a detailed outline of the government's financial framework, encompassing sources of revenue and categories of expenditure within the Indian economy. This fiscal blueprint offers insights into how the government manages its finances to drive economic growth and development.
Sources of Government Revenue
The central government's income is derived from multiple streams, each contributing to the overall fiscal health. Here is a breakdown of the primary sources:
- Borrowings and Liabilities (24%): This constitutes the highest share, involving funds raised through bonds, treasury bills, domestic and foreign loans, and obligations like small savings and provident funds.
- Income Tax (21%): A direct tax levied on the annual income of individuals, forming a significant portion of government revenue.
- Corporation Tax (18%): Imposed on the net profits or income generated by businesses and corporations, this tax is crucial for corporate contributions to the exchequer.
- GST and Other Taxes (15%): The Goods and Services Tax, an indirect tax that replaced various central and state taxes such as VAT and excise duty, plays a key role in revenue collection.
- Non-Tax Revenue (10%): Income from sources other than taxes, including fines, penalties, and dividends from public sector undertakings.
- Union Excise Duties (6%): An indirect tax on the manufacture or production of specific goods like petroleum products and tobacco, partially replaced by GST but still relevant.
- Customs (4%): Duties imposed on imports and exports to regulate trade and generate revenue.
- Non-Debt Capital Receipts (2%): Funds that enhance assets or reduce liabilities without future repayment obligations, contributing a smaller share.
Allocation of Government Expenditure
The central government's expenses are distributed across various sectors to address national priorities and support state governments. Here is how the rupee is spent:
- States' Share of Taxes (22%): The largest expense, involving the transfer of tax revenue collected by the central government to state governments to strengthen their financial capabilities.
- Interest Payments (20%): Charges on borrowing and debt, reflecting the cost of government financing.
- Central Sector Schemes (17%): Programs fully funded and implemented by central government ministries, primarily targeting areas under the Union list of the Constitution.
- Defence (11%): A major priority, with significant allocation to ensure national security and modernize defence infrastructure.
- Centrally Sponsored Schemes (8%): Initiatives jointly funded by the Centre and states to address shared developmental goals.
- Finance Commission and Other Transfers (7%): Allocations focused on distributing financial resources between the Union and State governments as per recommendations.
- Subsidies (6%): Financial aid provided to specific sectors of the economy to promote affordability and growth.
- Civil Pension (2%): Pensions for government employees, with the remaining 6% allocated to other miscellaneous costs incurred by the government.
This budget underscores the government's commitment to fiscal prudence while addressing critical areas such as infrastructure development, healthcare enhancement, and educational reforms. The detailed breakdown of revenue and expenditure highlights the strategic allocation of resources to foster economic stability and progress in the coming fiscal year.
