Finance Minister Nirmala Sitharaman will present the Union Budget 2026-27 this Sunday. FE explains some key terms in the Budget documents, and what stakeholders could look forward to
Gross domestic product
Gross domestic product (GDP) of a nation is the monetary value of “final” goods and services (those consumed by the final user) produced within its geographies in a given period of time, say a quarter or a year.
Apart from production for sale, it also includes no-market production such as certain defence, education and health services by the government, but excludes unpaid work and black-market activities. GDP takes into account wear and tear of capital stock.
Nominal and real GDP
Nominal GDP reflects the current value of the currency, unadjusted for inflation/deflation. Real GDP eliminates the distortion caused by inflation or deflation, and, therefore, gives a clearer picture of how the national output is expanding or contracting year on year.
Utility of nominal GDP
It is used to compare the nation’s output with other factors that are not inflation-adjusted, like public debt, government budget deficits/ surplus, current account surplus/ deficit, tax collected, etc. When it is said India is the fifth largest economy, and will be the third largest in 5-7 years, what is being counted is the nominal GDP.
Nominal GDP growth for FY26, as per the Budget Estimate, is pegged at 10.1% (`356.98 lakh crore). The advance estimates pegged it at `357.1 lakh crore. The BE of total expenditure for FY26 is `50.6 lakh crore, implying 14.1% of GDP (Advance Estimate).
To look for in Budget 2026: Will the FY26 BE for Total Expenditure be met? (A shortfall is expected). What’s the nominal GDP estimate for FY27, and what is the tax buoyancy envisaged?
Finance Bill
Finance bill presented along with the Annual Financial Statement, details the imposition, abolition, remission, alteration or regulation of taxes proposed in the Union Budget. It also contains other provisions relating to the Budget that could be classified as Money Bill.
A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. Among the laws that are commonly sought to be amended via Finance Bills each year are Income-Tax Act, Customs Act, FRBM Act, Securities Contracts Regulation Act, Foreign Exchange Management Act, Prevention of Money Laundering Act, etc.
Capital & revenue receipts
Capital receipts include market borrowings, other loans and also non-debt receipts like proceeds of disinvestment. The receipts cause a decrease in the government’s assets. Revenue receipts include (mostly) tax and non-tax revenues.
The latter consists of interest and dividend receipts from investments as well as other receipts for services rendered by the government.
To look for in Budget 2026: What is the estimate for RBI dividend for FY27?
Tax revenue
This is revenue collected from taxes imposed on income and profits (direct taxes) and those levied on consumption of goods and services/transactions (indirect taxes), and is the main source of the government’s revenue.
Indirect taxes include the Goods and Services Tax (GST), excise duty, basic customs duty (tariff) on imports, while personal income tax (PIT), corporate income tax and capital gains tax are among various direct taxes.
As per BE FY26, personal income tax is the single largest non-borrowed receipt item accounting for 22% of total inflows, followed by GST (18%) and corporate tax (17%). However, the deep PIT cuts in the Budget FY26 has resulted in a drop in revenue growth.
Revenue deficit is the excess of revenue expenditure over revenue receipts. If receipts are more than expenses, it is a surplus.
To look for in Budget 2026: What is the extent of shortfall in FY26 tax revenue from the BE level, and what are the projections for FY27?
Capital expenditure
This creates or reduces government’s assets/liabilities, consists of expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc., and loans and advances granted by the Centre to states/UTs.
As per BE, FY26 capital expenditure is `11.2 lakh crore (3.1% of GDP) versus `9.5 lakh crore (3.2%) in FY24 (RE). The Budget also uses a term “effective capital expenditure” which includes grants-in-aid that helps creation of capital assets.
To look for in Budget 2026: What is the target for FY27?
Revenue expenditure
Incurred for normal running of government departments and services, interest payments on debt, subsidies, etc. These don’t necessarily result in creation of assets.
To look for in Budget 2026: Does it signal any significant rise in spend on healthcare and education? Is interest payments on the decline as a percentage of Budget?
Gross and net tax receipts
Gross tax receipts include all taxes collected net of refunds, while Net Tax Receipts (NTR) are the actual inflows into the Budget after mandatory devolution of certain part of revenues from the divisible tax pool to states.
Gross fiscal deficit
This is the difference between the total expenditure by way of revenue, capital and loans net of repayments on the one hand, and revenue receipts and capital receipts which are not in the nature of borrowing but which accrue to the government.
To look for in Budget 2026: Will the BEs for fiscal deficit (4.4% of GDP) and revenue deficit (1.5% of GDP) be achieved? What is the deficit target for FY27, given the shift in focus to debt reduction
Fiscal policy/ FRBM Act
Keeping the public debt within reasonable levels and creating the right conditions for private enterprise are among the government’s many goals. This calls for an appropriate fiscal policy. India’s fiscal policy is laid out in the Fiscal Responsibility and Budget Management Act, 2003.
A Macro-economic Framework Statement is presented every year to Parliament under Section 3 of the Act, with the Budget. The Medium-Term Fiscal Policy Statement cum Fiscal Policy Strategy Statement sets out the three-year rolling targets for specific fiscal indicators.
Though the FRBM targets fiscal deficit of 3% of GDP and elimination of revenue deficit, the targets have been missed in recent years, owing to various contingencies.
Public debt
It is the total amount, including liabilities, borrowed by the Union and the States. A government-appointed panel had pitched for a debt-to-GDP ratio of 60% (40% for Centre, 20% for states). The target for the Centre is to cut its debt to 50%+/-1 by FY31.
To look for in Budget 2026: What is the fiscal roadmap for FY27 onwards?