Relevance: GS III (Economy – Budgeting) & GS II (Polity) | Source: Budget Documents 2026-27
1. The Constitutional “Passbook”
The Budget, legally called the Annual Financial Statement (Article 112), acts as the nation’s passbook.
- The Framework: The government cannot withdraw a single rupee without Parliament’s permission (Article 114 – Appropriation Bill) and cannot collect taxes without approval (Article 110 – Finance Bill).
- The Shift: The 2026-27 Budget pivots from “Post-Pandemic Recovery” to building “High-Tech Capability,” aiming to escape the middle-income trap.
2. The Numbers that Matter
- Fiscal Deficit: Targeted at 4.3% of GDP, signaling a path of fiscal consolidation.
- Capital Expenditure (Capex): A record allocation of ₹12.22 Lakh Crore. This is “good quality” spending meant to create long-term assets like High-Speed Rail and freight corridors.
- Debt Goal: To bring the total Debt-to-GDP ratio below 50% by 2031.
3. Where Does the Rupee Come From & Go?
- Top Source (Income): Borrowings (27%) remain the largest source of funds, followed by Income Tax (19%).
- Trend: Income Tax collections have structurally overtaken Corporate Tax, showing better compliance by individuals.
- Top Expense (Outflow): Interest Payments (26%). This is a major concern. When over a quarter of the budget goes just to pay interest on old loans, it “crowds out” funds for health and education.
4. New Engines of Growth
- Biopharma SHAKTI: A ₹10,000 crore fund to move Indian pharma from generic assembly to innovation.
- ISM 2.0: A ₹40,000 crore push for semiconductor chip design.
- Bharat-VISTAAR: A digital initiative bringing Artificial Intelligence (AI) to farmers.
UPSC Value Box
| Concept / Article | Relevance for Prelims |
| Article 112 | Annual Financial Statement. It mandates that the President shall cause to be laid before Parliament a statement of estimated receipts and expenditure. |
| Article 114 | Appropriation Bill. No money can be withdrawn from the Consolidated Fund of India without passing this bill. |
| Crowding Out Effect | A situation where high government borrowing (and subsequent high-interest payments) uses up available credit and funds, leaving less for the private sector and social welfare. |
Q. With reference to the budgetary process in India, consider the following statements:
- The term “Budget” is explicitly defined under Article 112 of the Constitution of India.
- The Appropriation Bill (Article 114) gives the government legal authority to withdraw funds from the Consolidated Fund of India.
- In the Union Budget 2026-27, the single largest component of government expenditure is Defence.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Correct Answer: (b)
Share This Story, Choose Your Platform!
Start Yours at Ajmal IAS – with Mentorship StrategyDisciplineClarityResults that Drives Success
Your dream deserves this moment — begin it here.
