Key facts

  • Union Budget 2025-26 — Presented on 1 February 2025 — Total expenditure: ₹50.65 lakh crore — Total receipts: ₹34.96 lakh crore (excluding borrowings)
  • Revenue Receipts — Include tax revenue: income tax, GST, customs, excise — Include non-tax revenue: dividends, interest, fees
  • Revenue Expenditure vs Capital Expenditure
  • Fiscal Consolidation Path — Target: 4.4% of GDP (2025-26), then 4.1% (2026-27) — Budget 2024-25 actual fiscal deficit was 4.9% of GDP
  • Public Debt — Total public debt (FY2023-24): approximately ₹172 lakh crore (84.5% of GDP)

Key Points at a Glance

  1. 1

    Union Budget 2025-26

    • Presented on 1 February 2025
    • Total expenditure: ₹50.65 lakh crore
    • Total receipts: ₹34.96 lakh crore (excluding borrowings)
    • Fiscal deficit: ₹15.69 lakh crore (4.4% of GDP)
  2. 2

    Revenue Receipts

    • Include tax revenue: income tax, GST, customs, excise
    • Include non-tax revenue: dividends, interest, fees
    • Total revenue receipts (2025-26 BE): ₹34.20 lakh crore
    • Gross tax revenue: ₹42.70 lakh crore after transfers to states
  3. 3

    Revenue Expenditure vs Capital Expenditure

    • Revenue expenditure (salaries, interest, subsidies, pensions) creates no assets: ₹37.09 lakh crore (2025-26)
    • Capital expenditure (infrastructure, loans to states) creates assets: ₹11.21 lakh crore (3.1% of GDP)
    • Continued high capex thrust reflects investment-led growth strategy
  4. 4

    Four Types of Deficit

    • (a) Revenue Deficit = Revenue Expenditure − Revenue Receipts
    • (b) Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings) — most comprehensive measure
    • (c) Primary Deficit = Fiscal Deficit − Interest Payments
    • (d) Effective Revenue Deficit = Revenue Deficit − Grants for capital assets
  5. 5

    Fiscal Consolidation Path

    • Target: 4.4% of GDP (2025-26), then 4.1% (2026-27)
    • Budget 2024-25 actual fiscal deficit was 4.9% of GDP
    • FRBM Act 2003 original statutory target was 3% of GDP
    • Medium-term path aims to stay below 4.5%
  6. 6

    Public Debt

    • Total public debt (FY2023-24): approximately ₹172 lakh crore (84.5% of GDP)
    • Internal debt: market borrowings, small savings, provident funds
    • External debt: multilateral loans, bilateral loans, NRI bonds
    • High domestic savings rate makes this level considered manageable
  7. 7

    Finance Commission (Art. 280)

    • Constitutional body appointed every 5 years
    • Recommends distribution of tax revenues between Centre and States
    • Also recommends grants-in-aid to states
    • 16th Finance Commission submitted its report in November 2025; award period 2026-31; 41% vertical devolution retained
  8. 8

    15th Finance Commission

    • Period 2020-25, chaired by N.K. Singh
    • Recommended 41% devolution from divisible pool (14th FC was 42%, minus 1% for J&K-Ladakh reorganisation)
    • Introduced performance-based grants linked to states' own-tax effort
    • Also linked grants to health expenditure and nutrition outcomes
  9. 9

    FRBM Act 2003

    • Full name: Fiscal Responsibility and Budget Management Act
    • Mandates elimination of Revenue Deficit and capping of Fiscal Deficit
    • NK Singh Committee (2017): recommended replacing fixed target with a range (1.7–3.5% fiscal deficit)
    • Escape Clause: allows exceeding targets by 0.5% during national calamity, security threats, or structural reforms
  10. 10

    Fiscal Policy Tools

    • Expansionary: tax cuts + higher spending during recession
    • Contractionary: tax hike + spending cuts during inflation
    • India used expansionary policy post-COVID-19 with record capex and PLI schemes
    • Budget 2025-26 signals contractionary consolidation: deficit reduced from 9.2% (2020-21) to 4.4%
  11. 11

    GST — the Biggest Tax Reform

    • Implemented from 1 July 2017, subsuming 17 central and state indirect taxes
    • GST collections crossed ₹2.10 lakh crore in April 2024 (highest monthly collection ever)
    • Average monthly GST for 2024-25: ₹1.82 lakh crore
  12. 12

    Capital Expenditure Multiplier

    • Capex has a fiscal multiplier of 2.5–3x — ₹1 of government capital spending generates ₹2.5–3 of economic activity
    • India's capex grew from ₹5.54 lakh crore (2022-23) to ₹11.21 lakh crore (2025-26 BE)
    • Near doubling in three years underscores the infrastructure-first growth strategy

What is public finance and why does the Union Budget matter for RAS?

Public finance is the study of how the government raises money, spends it, manages debt and uses the Budget to shape growth, welfare and fiscal stability.

What is Public Finance?

Public finance is the study of how governments raise revenue, allocate expenditure, and manage debt to fulfil their economic and social objectives. For India, it is the primary instrument to redirect resources toward infrastructure, welfare, and inclusive growth while maintaining macroeconomic stability. In exam terms, the subject connects economic theory with the annual numbers that decide taxation, subsidies, transfers to states, public investment and borrowing.

The Union Budget

The Union Budget is India's annual financial statement, presented under Article 112 of the Constitution ("Annual Financial Statement"). It presents the government's estimates of revenue and expenditure for the coming fiscal year (April-March) and is the most significant policy document tabled in Parliament. It is also the document through which fiscal policy becomes visible: receipts show how the state raises resources, expenditure shows policy priorities, and deficit figures show the borrowing requirement.

Since 2017, the Budget presentation date has been shifted from the last day of February to 1 February (under Arun Jaitley), and the Railway Budget has been merged with the General Budget. This change gives ministries and states more time to plan spending from the start of the financial year.

According to the RPSC RAS/RTS Mains 2024 syllabus, the written examination has four descriptive or analytical papers of 200 marks each.

Why This Topic Matters for RAS 2026

Topic 27 has appeared in every RPSC exam from 2013 to 2023 - 16 total marks over 5 years. This makes it the most consistent topic in Paper I Unit II Economics after Rajasthan-specific welfare schemes.

Key areas to master for 2026:

  • Union Budget 2025-26 data and fiscal consolidation targets
  • Four types of deficits
  • GST revenue figures
  • Finance Commission recommendations
  • FRBM targets and escape clause

PREDICTED Predicted RAS Questions

Based on PYQ trends and 2026 syllabus analysis

1 5M What is Fiscal Deficit? State the fiscal deficit target of India for 2025-26. 5 marks · 50 words

Model Answer

Fiscal Deficit is the difference between the government's total expenditure and total receipts excluding borrowings — it equals the government's net borrowing requirement. It is the most comprehensive measure of government's fiscal imbalance, affecting inflation, interest rates, and private investment. In Union Budget 2025-26, India's fiscal deficit is targeted at ₹15.69 lakh crore, i.e., 4.4% of GDP, down from 4.9% in 2024-25, continuing the fiscal consolidation path under FRBM Act 2003.

~50 words • 5 marks