Congress criticizes the budget
The Sunday Mail
New Delhi: Former Finance Minister and MP P. Chidambaram, reacting to the Union Budget, said that every pre-budget commentator and writer, and every student of economics, must have been stunned by what they heard in the Finance Minister’s speech in Parliament today.
I believe that a budget is not merely a statement of annual revenue and expenditure. In the current circumstances, the budget speech should have presented a clear perspective on the major challenges that were highlighted in the Economic Survey 2025-26 released a few days ago. I doubt if the government and the Finance Minister have even read the Economic Survey. If they have, it seems they have decided to completely disregard it and have reverted to their favorite pastime – showering people with words, usually through acronyms.
I can list at least 10 such challenges that have been identified by the Economic Survey and many knowledgeable experts:
1. Punitive tariffs imposed by the United States, which have created pressure on manufacturers, especially exporters;
2. Prolonged trade conflicts, which will weigh on investment;
3. The growing trade deficit, especially with China;
4. The low level of gross fixed capital formation (around 30 percent) and the reluctance of the private sector to invest;
5. The uncertain outlook for foreign direct investment (FDI) flows into India and the continuous outflow of foreign portfolio investment (FPI) over the past several months;
6. The extremely slow pace of fiscal consolidation and the persistently high fiscal deficit and revenue deficit, contrary to the FRBM;
7. The persistent gap between officially declared inflation figures and the actual bills for household expenses, education, health, and transportation;
8. The closure of millions of MSMEs and the struggle for survival of the remaining MSMEs;
9. The precarious employment situation, especially unemployment among the youth; 10. Increasing urbanization and deteriorating infrastructure in urban areas (municipalities and municipal corporations).
None of these issues were addressed in the Finance Minister’s speech. It was therefore not surprising that the applause was perfunctory and most of the audience quickly lost interest and drifted away. Even the broadcast by Parliament TV cut out several times!
Even by an accountant’s standards, this was an extremely poor account of financial management in 2025-26. Revenue receipts fell short by Rs 78,086 crore, and total expenditure was lower by Rs 1,00,503 crore. Revenue expenditure was lower by Rs 75,168 crore, and capital expenditure was cut by Rs 1,44,376 crore (Centre Rs 25,335 crore and States Rs 1,19,041 crore). Not a single word was said to explain this dismal performance. In fact, the Centre’s capital expenditure has decreased from 3.2 percent of GDP in 2024-25 to 3.1 percent in 2025-26.
The cuts in revenue expenditure have fallen on items that concern ordinary people. For example:
Rural Development: Rs 53,067 crore
Urban Development: Rs 39,573 crore
Social Welfare: Rs 9,999 crore
Agriculture: Rs 6,985 crore
Education: Rs 6,701 crore
Health: Rs 3,686 crore
Funding has been cut in crucial sectors and programs. The much-touted Jal Jeevan Mission saw its expenditure ruthlessly slashed from Rs 67,000 crore to a mere Rs 17,000 crore. (This has been increased to ₹67,670 crore in 2026-27, but what is the credibility of this figure?)
After an exercise spanning several months, the revised estimate (RE) of the fiscal deficit (FD) remains unchanged at 4.4 percent, in line with the budget estimate (BE), and the projection for 2026-27 is that the FD will decrease by only 0.1 percent of GDP. The revenue deficit will remain constant at 1.5 percent. This is certainly not a bold exercise in fiscal discipline and consolidation.
The most serious criticism of the budget speech is that the Finance Minister never tires of adding to the number of schemes, programs, missions, institutions, initiatives, funds, committees, hubs, etc. I counted at least 24. I leave it to your imagination how many of these will be forgotten and disappear by next year.
Finally, on Part B of the speech. Months after the passage of the Income Tax Act, 2026—which will come into effect on April 1, 2026—the Finance Minister has tinkered with some of the rates. While the impact of the numerous minor changes will have to be carefully examined, it should be remembered that the vast majority of people have no concern with income tax or income tax rates. As far as indirect taxes are concerned, the average person will only be concerned with paragraphs 159, 160, and 161 of the speech. I welcome these small concessions. Our conclusion is that the budget speech and the budget itself do not measure up to the standards of economic strategy and economic statesmanship.
