The Centre’s debt-control strategy will be tested by uncertain nominal growth and new demands

Subscribe to enjoy similar stories. The world has changed dramatically since Nirmala Sitharaman presented the Union budget in February 2025. US President Donald Trump has taken a wrecking ball to the institutional edifice that—despite some obvious fractures—has provided a stable framework for economic activity around the world.

The new edition of the budget that the finance minister will unveil this Sunday should thus be watched closely not only for its numbers. There may also be clues on how the government plans to help the Indian economy through uncharted waters in the years ahead. It will be about frameworks as well as figures.

First, the bean counting. Indian fiscal policy has gained credibility over the past five years for two reasons. The old habit of massaging the annual financial statement by either making unrealistic assumptions about revenues or parking government borrowings outside the budget has been done away with.

And the government has generally managed to stick faithfully to the fiscal glide path that it committed itself to after the pandemic ended. This year will be no different. It is very likely that the finance minister will announce a fiscal deficit for 2025-26 somewhere close to 4.4% of gross domestic product (GDP), as she had budgeted for a year ago.

There have been bumps along the way. The most important one is that tax collections in the ongoing financial year are likely to be significantly lower than the ₹34.96 trillion (on a gross basis) and ₹28.37 trillion (on a net basis) assumed in the 2025-26 budget. Poor tax collections are themselves the result of a sharp deceleration in nominal GDP growth as well as reductions in the goods and services tax (GST) in the second half of the year.