A look behind the calculations: How the budget math works

economictimes.indiatimes.com:

Union Budget 2024: Finance Minister Nirmala Sitharaman is going to present an interim budget on February 1. This budget is not expected to include any major announcements — that will be left to the full budget which will be presented by the new government elected after the Lok Sabha elections in May. However, the interim budget will include what is at the heart of a budget — projections for the coming financial year, that is the calculations about income, spending and borrowings.

Read our full Budget 2024 coverage

How does the budget math work? What are the key calculations that go into the making of a budget? The process of budget-making is a forward-looking exercise, since it is for the coming year, and is based on several assumptions. The budget in effect is a matter of several projected numbers.

Nominal GDP, the cornerstone of budget making

The first and the most important assumption or projection is the nominal GDP for the coming year on which the entire budget edifice is constructed. The finance minister must assume how much the economy will grow in the next year to make further key assumptions about income, spending and borrowing. The key numbers in the budget are calculated in proportion of the projected nominal GDP.

• A cheer for economy may keep big Budget splurge away

  Budget can ignore fiscal largesse that doesn't necessarily impact election outcome, says PwC’s Ranen Banerjee

  Budget 2024 Expectations Live: Taxes, EVs, Jobs and more. Here's what to look forward

  What electric two-wheeler makers need from Budget

The first step in projecting next year's nominal GDP is estimating the nominal GDP for the ongoing financial year. This happens through the process called the first advance