Sitharaman's Historic Sunday Budget: Growth vs Fiscal Discipline in Focus

This will be her ninth consecutive Budget, making her the first woman finance minister to achieve this feat, and the 15th Budget of the Narendra Modi-led government. It is also the second full Budget since the National Democratic Alliance (NDA) returned to power for a third straight term in 2024.

The FY27 Budget comes at a time of heightened complexity for the Indian economy. While domestic demand has remained resilient and inflation has moderated from recent peaks, the global environment remains deeply uncertain.

Geopolitical tensions, volatile commodity prices, uneven monetary easing by major central banks and rising trade fragmentation continue to weigh on the outlook. Adding to the challenge are punitive 50 per cent tariffs imposed by US President Donald Trump on Indian goods, which have unsettled financial markets and contributed to sustained foreign investor outflows and a record low rupee.

So far, sweeping income tax and GST cuts, higher infrastructure spending and interest rate reductions by the Reserve Bank of India have helped cushion the economy against these external shocks. However, those tax cuts have also dented government revenues, narrowing the fiscal space available to support growth in the new Budget.

Economists expect this year's Budget to focus on defence, infrastructure, capital expenditure, power and affordable housing, while carefully balancing social welfare priorities with fiscal prudence. The emphasis, they say, will be on sustaining growth momentum without compromising the government's commitment to fiscal consolidation.

The government has steadily reduced the fiscal deficit from the Covid-induced peak of 9.2 per cent to an estimated 4.4 per cent in FY26, and experts believe this path of "fiscal rectitude" will largely be maintained, with no major deviation expected.

Unlike the FY26 Budget, which was more explicitly geared towards stimulating middle-class consumption through tax relief, the FY27 Budget's consumption push is expected to be more targeted.

Overall, economists say the Budget is likely to strike a careful balance between sustaining growth and maintaining fiscal discipline, while addressing near-term challenges arising from an unprecedented phase of global geopolitical and economic flux.

- IANS