Indian Economy
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- Article 112 — Annual Financial Statement (the Budget); Art. 266 Consolidated Fund; Art. 267 Contingency Fund; Art. 265 — no tax without authority of law.
- Railway Budget merged with the Union Budget in 2017; presented on 1 February since 2017. Budget 2026-27 was presented by Nirmala Sitharaman on 1 February 2026.
Budget 2026-27 at a glance (BE)
| Item | Figure |
|---|---|
| Total expenditure | ₹53.47 lakh crore (₹53,47,315 cr) |
| Total receipts (ex-borrowings) | ₹36.52 lakh crore; net tax receipts ₹28.7 lakh cr |
| Borrowings (fiscal deficit in ₹) | ₹16.96 lakh crore |
| Fiscal deficit | 4.3% of GDP (RE 2025-26: 4.4%) |
| Revenue deficit | 1.5% of GDP |
| Primary deficit | 0.7% of GDP |
| Capital expenditure | ₹12.2 lakh crore (from ₹11.2 lakh cr) |
| Central debt | 55.6% of GDP; glide path to ~50% by March 2031 |
| Disinvestment target | ₹80,000 crore |
| Nominal GDP growth assumed | 10% |
New in 2026-27: Biopharma SHAKTI (₹10,000 cr, 5 yrs), SME Growth Fund (₹10,000 cr), Infrastructure Risk Guarantee Fund, Semiconductor Mission 2.0, Electronics Component Manufacturing outlay raised to ₹40,000 cr, ₹20,000 cr carbon-capture allocation, City Economic Regions (₹5,000 cr each), MAT cut 15% → 14%.
Deficit definitions
| Deficit | Formula |
|---|---|
| Fiscal | Total expenditure − total receipts excluding borrowings |
| Revenue | Revenue expenditure − revenue receipts |
| Primary | Fiscal deficit − interest payments |
| Effective capital expenditure | Capex + grants for creation of capital assets |
FRBM Act, 2003 — fiscal discipline targets; amended periodically (current glide: fiscal deficit below 4.5% of GDP, then toward ~4%).
Detailed notes
The Budget — what the Constitution calls it
The word 'Budget' appears nowhere in the Constitution. Article 112 names it the Annual Financial Statement — estimated receipts and expenditure of the government for a year, laid before both Houses. Since 2017 it is presented on 1 February (earlier: the last day of February), and the separate Railway Budget was merged into the general Budget the same year. A day before, the government tables the Economic Survey (prepared by the Department of Economic Affairs under the Chief Economic Adviser). The expenditure side appears as Demands for Grants per ministry; approval flows through the Appropriation Bill (spending) and the Finance Bill (tax proposals).
The three funds
- Consolidated Fund of India — Article 266(1): all revenues, loans and receipts; Parliament must authorise every withdrawal.
- Public Account — Article 266(2): money held in trust — provident funds, small savings; no vote needed.
- Contingency Fund — Article 267: at the disposal of the President for unforeseen spending; corpus raised to ₹30,000 crore in 2021.
Receipts split into revenue (tax, interest, dividends — non-creating) and capital (borrowings, disinvestment, loan recoveries); expenditure likewise splits into revenue (salaries, subsidies, interest) and capital (assets — roads, buildings, defence equipment).
The deficits — four formulas that settle most questions
- Revenue Deficit = Revenue expenditure − Revenue receipts: the government borrows to run day-to-day affairs.
- Effective Revenue Deficit = Revenue deficit − grants for creation of capital assets: introduced in 2011-12.
- Fiscal Deficit = Total expenditure − Total receipts other than borrowings: the year's total borrowing need.
- Primary Deficit = Fiscal deficit − interest payments: this year's borrowing appetite, freed of past debts' interest.
The FRBM Act, 2003 set legal limits on these deficits (amended in 2018 to add debt-GDP targets); Budgets announce a multi-year fiscal glide path. In matching questions, fiscal deficit always 'includes' the others' interest burden — the largest single expenditure head is interest payment, followed by subsidies and defence.
Quick revision
- Budget = Annual Financial Statement (Art 112); presented 1 February since 2017; Railway Budget merged 2017.
- Funds: Consolidated 266(1), Public Account 266(2), Contingency 267 (President; ₹30,000 crore corpus).
- Economic Survey: day before, Dept of Economic Affairs; Appropriation Bill = spending, Finance Bill = taxes.
- RD = Rev Exp − Rev Rec; ERD = RD − capital-asset grants; FD = Total Exp − (Rec − borrowings); PD = FD − interest.
- FRBM Act 2003; interest payments are the largest expenditure head.
Types of questions asked
Every way this subtopic shows up in exams — how to recognise it, the formula or logic to use, and a solved example.
Type 1: Deficit arithmeticvery common4 practice Q
Expenditure, receipts and interest figures are given and one deficit is asked; or a relationship ('primary deficit is negative because') is tested.
- Fiscal deficit = total expenditure − total receipts excluding borrowings.
- Primary deficit = fiscal deficit − interest payments (it can be negative — a primary surplus).
- Revenue deficit = revenue expenditure − revenue receipts; plug the numbers in one step and check units (lakh crore).
Example: Total expenditure is ₹45 lakh crore and receipts excluding borrowings ₹39 lakh crore. The fiscal deficit is —
45 − 39 = ₹6 lakh crore — exactly the amount the government must borrow this year.
Type 2: Budget structure, articles and fundscommon2 practice Q
'Which article is the Annual Financial Statement', 'the Contingency Fund is at whose disposal', matching each fund with its article and purpose.
- Article 112 = Annual Financial Statement (the constitutional 'Budget'); Article 266(1) = Consolidated Fund; 266(2) = Public Account; Article 267 = Contingency Fund.
- Contingency Fund = President's disposal; Consolidated Fund = no withdrawal without Parliament's vote; Public Account = no vote needed.
- 'Budget' is not a constitutional word — options saying 'Budget is defined in Article 112' are wrong.
Example: The Contingency Fund of India is placed at the disposal of —
The President (Article 267) — used for unforeseen expenditure, later regularised by Parliament; corpus ₹30,000 crore.
Type 3: Revenue vs capital, effective revenue deficitcommon2 practice Q
'Which is a capital receipt', 'effective revenue deficit excludes', statements classifying disinvestment, borrowings, grants.
- Capital receipts: borrowings, disinvestment proceeds, recovery of loans — they either create liability or cut assets.
- Capital expenditure: roads, buildings, defence equipment, loans to states. Revenue expenditure: salaries, subsidies, interest.
- Effective revenue deficit = revenue deficit − grants for creation of capital assets (introduced 2011-12).
Example: Which of the following is a capital receipt?
Disinvestment proceeds — selling government equity reduces assets; borrowings and loan recoveries are the other classic capital receipts.
Type 4: FRBM and the fiscal glide pathoccasional2 practice Q
'The FRBM Act was passed in', statements on deficit targets, debt-GDP anchors, the meaning of a glide path in Budget speeches.
- FRBM Act 2003 — fiscal responsibility and budget management: legal deficit targets, amended in 2018 (debt anchors added).
- Budgets declare a fiscal glide path — a year-by-year path for fiscal deficit as a share of GDP.
- Interest payments, not subsidies, are the single largest revenue-expenditure head — a favourite 'true statement' fact.
Example: The FRBM Act, which sets legal targets for deficits and debt, was enacted in —
2003 — the Fiscal Responsibility and Budget Management Act disciplines deficits; a 2018 amendment added debt-to-GDP anchors.
Type 5: Budget process, dates and documentscommon2 practice Q
'Since which year is the Budget presented on 1 February', 'the Economic Survey is tabled when', 'the Railway Budget was merged in', questions on Demands for Grants / appropriation.
- From 2017: presentation on 1 February and the Railway Budget merged into the general Budget.
- Economic Survey comes the day before (Dept of Economic Affairs / Chief Economic Adviser).
- Spending needs Demands for Grants per ministry, then an Appropriation Bill; taxes move via the Finance Bill.
Example: The Economic Survey is presented —
A day before the Union Budget, by the Department of Economic Affairs; it reviews the economy's performance and outlook.
Formulas
equals government borrowing requirement
revenue items only
strips out past borrowing costs
Shortcut tricks
⚡ Budget 2026-27 number sheet
Spend 53.5 • Receipts 36.5 • Borrow 16.9 (₹ lakh crore); FD 4.3% • RD 1.5% • PD 0.7%; Capex 12.2; Debt 55.6%.
Example: Budget 2026-27 fiscal deficit?
4.3% of GDP (₹16.96 lakh crore).
⚡ Article trio for money matters
112-Budget • 266-Consolidated Fund • 267-Contingency Fund; 265-no tax without law.
Example: Which article is the Annual Financial Statement?
Article 112.
Where students lose marks
Quoting 4.4% for FY27 — 4.4% is the 2025-26 RE; the BE 2026-27 is 4.3%.
Confusing primary deficit (fiscal − interest) with revenue deficit (revenue expenditure − receipts).
Thinking the railway budget still exists separately — merged in 2017.
Practice sets — 14 questions
Sets of 10, mixed across the question types above. Each answer comes with a step-by-step explanation.
Topic test · 10 questions
Suggested time 4 min · wrong answers go to your mistake notebook automatically.