2. Union Budget 2026–27 and Fiscal Consolidation Concerns

Background The Union Budget 2026–27 focuses on sustaining growth through capital expenditure (capex) and technologydriven development amid global uncertainty. Key Highlights • Increased share of capital expenditure, with a relative decline in revenue expenditure. • However, the growth rate of capex has slowed compared to earlier post-pandemic years. • The pace of fiscal deficit reduction has weakened after COVID-19. • A high debt-to-GDP ratio is limiting fiscal space. Fiscal Stress Indicators (Value Addition) • Interest payments consume nearly 40% of revenue receipts, crowding out developmental spending. • GST buoyancy remains below expectations, affecting revenue mobilisation. • Risks of intergenerational equity due to rising public debt. Constitutional & Legal Framework• Article 266: Consolidated Fund of India. • FRBM Act, 2018: Mandates fiscal discipline and medium-term targets. Conclusion While capex-led growth is desirable, credible fiscal consolidation, improved tax compliance, and higher GST efficiency are crucial for long-term macroeconomic stability. UPSC Relevance: GS Paper III – Public finance, fiscal policy, economic reforms