Relevance: GS III (Economy – Budgeting & Fiscal Policy) | Source: Indian Express
1. The Philosophy: From “Outlays” to “Outcomes”
The Union Budget 2025-26 marks a strategic shift in governance.
- The Change: The government is moving beyond just allocating money (“Financial Outlays”) to focusing on the actual results achieved on the ground (“Outcome Budget”).
- The Numbers: The total spending is estimated at ₹50.65 lakh crore. Notably, Capital Expenditure (Capex)—money used to build assets like roads and bridges—is growing by 10.1%, significantly faster than day-to-day operational expenses (Revenue Expenditure), signaling a focus on long-term growth.
2. Fiscal Discipline & Infrastructure
- Fiscal Deficit: The government is tightening its belt, targeting a Fiscal Deficit of 4.4% of GDP for FY26 (down from 4.8%), showing a commitment to fiscal consolidation.
- The Speed of Construction: Highway construction speed has nearly tripled in a decade, rising from 12.1 km/day (2014) to 33.8 km/day. The National Highway network has expanded by 60%.
3. Taxation: The New Rulebook
The budget introduces the Income-tax Act, 2025, replacing the 64-year-old Act of 1961.
- Middle-Class Relief: Under the new regime, there is a 100% tax rebate for income up to ₹12 lakh (previously ₹7 lakh). Effectively, salaried individuals earning up to ₹12.75 lakh will pay zero tax.
- Simplification: TDS limits have been rationalized (e.g., TDS on rent threshold raised to ₹6 lakh), and the time to file updated returns extended to four years to improve compliance.
UPSC Value Box
| Concept / Term | Relevance for Prelims |
| Outcome Budget | A budgeting practice that measures the quality of implementation and physical targets achieved, rather than just the quantity of funds spent. |
| Capital Expenditure (Capex) | Expenditure that creates assets (roads, hospitals) or reduces liability (repaying loans). It has a high “Multiplier Effect” on the economy compared to Revenue Expenditure. |
| Fiscal Deficit | The difference between the government’s total expenditure and its total revenue (excluding borrowings). It indicates the total borrowing requirement of the government. |
Q. With reference to the Union Budget 2025-26 and the concepts of government budgeting, consider the following statements:
- Capital Expenditure is projected to grow at a slower rate than Revenue Expenditure in the current fiscal year.
- The new Income-tax Act, 2025 is set to replace the existing Income-tax Act of 1961.
- Outcome Budgeting focuses primarily on the financial outlays allocated to ministries rather than the physical targets achieved.
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
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