( from left ) Shishir Sinha, Associate Editor, businessline; Sitikantha Pattanaik, Chief Economist, Nabard; Rajani Sinha, Chief Economist, CareEdge Ratings; Praveen K Jha, Professor of Economics and Chairperson of the Centre for Economic Studies and Planning, School of Social Sciences, JNU and R. Kavita Rao, Director, National Institute of Public Finance and Policy at a session on ‘Micro Economic Impact of the Budget’. | Photo Credit: BIJOY GHOSH

Economists hailed fiscal consolidation measures as announced in the Budget even as they expressed concern over shortfall in revenue to the tune of ₹1.92 lakh crore, terming it as “very rare” and suggested revisiting the GDP growth rate estimate, which may not be substantially changed after the upcoming revision in the base year.

Participating in a discussion on “Micro Economic Impact of the Budget”, moderated by businessline Associate Editor Shishir Sinha on Friday, Rajani Sinha, chief economist, CareEdge Ratings, said: “We had already seen in the last 4-5 years a lot of fiscal consolidation tightening had already happened. The important point to note is that the Centre has clearly conveyed that direction is going to continue towards fiscal consolidation.”

She said fiscal deficit for the Centre reduced from a high of 9.2 per cent in FY21 to 4.4 per cent in FY26, and budgeted at 4.3 per cent in FY27.

Growth stimulus

“But, the pace of consolidation has reduced, which is okay because the government also needs to be prepared for growth stimulus as required as we are going through a very turbulent global environment,” Rajani Sinha said adding government finances should not be tightened so much that it hurts growth.

But, Praveen K Jha, chairperson of Centre for Economic Studies, JNU, pointed out that the gross tax revenue falling short by ₹1,92,461 crore is very rare in India’s history. “But this is something which possibly has a lot to do with misreading of our growth rate,” he said adding it (GDP growth rate) has been part of the debate for last 5 years.

Citing opinions of former RBI Governor Raghuram Rajan, former Chief Economic Advisor Arvind Subramanian, Nobel laureate Abhijit Banerjee and International Monetary Fund (IMF), Jha said: “Clearly there is something deeply flawed with the way we have the projected growth rates, and this needs to be revisited as soon as possible if you want to get serious about projections of revenues and so on because what revenue we have is a function of growth rate.”

Jha and other panellists also expressed concerns over 41 per cent devolution allowed by the Finance Commission against minimum 50 per cent demanded by States.

Sinha said that there would be challenges for state government finances, which the Economic Survey has also highlighted. “We have seen in the last few years, many of the state governments have announced a lot of freebies, and that is going to put pressure on their finances.” She also said that the borrowings by States which rose to ₹3 trillion after Covid pandemic has further gone up to ₹5.5 trillion and it may at soon reach ₹6 trillion. She foresees high state government borrowings.

R Kavita Rao, director of National Institute of Public Finance and Policy, while referring to the recent announcement of a likely India-US trade deal said that the immediate impact (on GDP) is not expected to be dramatically large. “Our inflation has been for the last one year rather low and optimistically I would like inflation to be a little higher from a government fiscal perspective so that we do get a nominal GDP of 10 per cent. I am actually concerned as actually we may land up with a lower nominal growth,” Rao said.

Nominal growth

The Union Budget has projected the nominal GDP growth rate of 10 per cent and the Economic Survey estimated real GDP growth rate of 6.8-7.2 per cent.

Rao also said that whenever it is talked about inflation, it is taken in a very negative connotation. “But for an economy when we have to talk about the virtuous cycle, we need certain kind of inflation because that will encourage the producer and at the same time that is going to help to get more and more tax revenue,” she said.

Sinha of Care Ratings also said that through this year’s Budget, the government has clearly indicated that it will be moving to a debt trajectory going forward. “They have outlined that they are looking at reducing the Centre’s debt from 56 per cent to 50 per cent by FY31, which basically implies a reduction of around 1 percentage point every year. It is a very reasonable target. It can be achieved as long as nominal GDP growth is around, even if it is 10-10.5 per cent, we will be able to achieve that,” she said.

“Hence, the government has consciously gone for a lower fiscal consolidation and it will be able to meet the debt target even if it goes a little slower on fiscal deficit,” she added.

Strategic direction

Sitikantha Pattanaik, chief economist, NABARD, said that this year’s Budget has provided strategic direction, supported by fiscal policy support while recognising that trend shifts both on the supply side and demand side in the farm sector. From the supply side, there are allied activities, that is fishery, forestry, and animal husbandry — together contribute 46 per cent and in next 5-6 years, it is going to almost 50 per cent, he noted.

“So far, the focus which was there on crops — food grains and horticulture — now gradually must shift to allied activities. This time, the two key announcements for fishery and animal husbandry sectors essentially try to ensure that the supply conditions improve in those areas,” Pattanaik said.

He also noted that in the consumption survey for food items, the share of cereals and sugar has dropped almost by half in both urban areas and rural areas. But, demand for milk, meat, fish and eggs are rising.

“This budget has recognised the shifting trend taking place on both supply side and demand side,” he added.

Published on February 6, 2026