Analysis of India’s Union Budget Growth and Funding Sources
Finance Minister Nirmala Sitharaman is gearing up to present the first budget of Prime Minister Narendra Modi’s third term next week in New Delhi. This budget for the financial year 2024-25 comes after the interim budget presented earlier this year, just before the general election.
The size of India’s union budget has seen a significant increase in recent years, growing from nearly Rs 27 lakh crores in FY 2019-20 to an estimated Rs 47.66 lakh crores by the end of this financial year, marking a growth of over 76 percent in just five years.
The massive amount of the Union budget alone accounts for 15 percent of the country’s estimated nominal GDP for the current financial year, which stands at Rs 327 lakh crores. An analysis by ETV Bharat shows that the compound annual growth rate of the Union Budget has outpaced the country’s nominal GDP growth rate over the past five years.
To fund such a massive budget, the government relies on three main sources: revenue receipts (tax revenue and non-tax revenue) and capital receipts (borrowings and recovery of loans). Tax revenue, which includes income tax, corporate tax, customs duty, excise duty, and GST, is the largest source of revenue for the government, accounting for over half of its total receipts.
Non-tax revenue, which includes dividends and profits from public sector companies and banks, also contributes to the government’s funding. Capital receipts, which involve loans taken by the government to meet its expenditure, make up a significant portion of the budget as well.
The growth trends over the years show a steady increase in the Union Government’s budgeted expenditure, with expectations of reaching Rs 48 lakh crores in FY 2024-25. This growth rate surpasses the country’s nominal GDP growth rate, indicating a robust financial outlook for the government.
As Finance Minister Nirmala Sitharaman prepares to unveil the budget for the upcoming financial year, all eyes will be on the strategies and allocations outlined to support India’s economic growth and development.