Budget 2025: Understanding the basics of India’s Union Budget | A beginner's guide

Budget 2025

The Indian union budget is a financial statement released by the government that accounts for its expenses in one fiscal year. The Budget document gives a complete understanding of the government's finances. It also helps one get a clear understanding of the taxes levied by the government.

Finance Minister Nirmala Sitharaman will present the union budget on February 1, 2025.

While understanding the Budget can be easy for some people, there are many who do not know how to read the budget document. Here's a list of key things to look out for:

Revenue, GDP, taxes, disinvestment

The budget has three parts on the revenue side - tax revenue, non-tax revenue, such as dividends and interests, and disinvestments.

Nominal GDP is the total value of all goods and services produced in a given period, usually quarterly or annually. Real GDP is nominal GDP adjusted for inflation. Real GDP is used to measure the actual growth of production without any distorting effects from inflation.

Mostly, income tax, corporate tax and GST grow at similar rates, unless the government expects GST to be much higher.

In FY23, the Centre’s gross tax revenue stood at Rs 30.43 lakh crore, of which direct tax revenue was Rs 14.2 lakh crore. Additionally, non-tax revenue, which includes dividends from RBI and public sector institutions, stood at Rs 2.86 lakh crore in FY23.

Disinvestment is the strategic selling or liquidation of government-owned assets, usually in the form of shares in state-owned companies and other assets.

Also Read | Union Budget 2025: What is Economic Survey? When is it presented?

Revenue and capital expenditure

Revenue expenditure is as important as groceries are to the households. They are a must, like how you cannot do without rice/wheat and electricity.

Capital expenditure is like spending money on value-generating assets for the longer term, like an individual buying a washing machine or a vacuum cleaner. The government’s capex is meant for building roads, railways, ports etc. It has a higher growth multiplier because it helps to build durable assets and create jobs in the economy.

Fiscal Deficit

Fiscal deficit is the gap between the government's income and expenditure. It also indicates the total amount that the government needs to borrow to cover its expenses.

The fiscal policy also helps you understand the valuation of the rupee in comparison to the global markets by comparing the Indian economy with the global economy.