Govt seeks parliament nod for net extra spending of ₹41,455 crore this year

The additional funds are meant for various expenditures, including fertiliser subsidy amounting to ₹11,000 crore, ₹7,525 crore for urea imports, and ₹9,473 crore for compensating state-run oil-marketing companies for losses made from selling fuel below market rates. The supplementary demands for grants, tabled by the finance ministry in parliament, also include additional revenue spending by Union home and education ministries.

“The first batch of Supplementary Demands for Grants for 2025-26 includes 72 Grants and 1 Appropriation. Approval of the Parliament is sought to authorise gross additional expenditure of ₹1,32,268.85 crore. Of this, the proposals involving net cash outgo aggregate to ₹41,455.39 crore and gross additional expenditure, matched by savings of the Ministries/Departments or by enhanced receipts/recoveries aggregates to ₹90,812.17 crore," the parliamentary document said. "Besides, token provision of ₹129 lakh is being sought, one lakh for each item of expenditure, for enabling re-appropriation of savings in cases involving New Service or New Instrument of Service."

The net additional spending of ₹41,455 crore is unlikely to have a big impact on the government’s fiscal deficit target of ₹15.69 trillion for the current financial year ending 31 March, as there could be some savings on the Centre’s effective capital expenditure of ₹15.48 trillion while a fast-expanding gross domestic product (GDP) could help absorb the extra expenditure.

Other items where additional revenue expenditure is proposed is ₹1,304 crore for department of higher education, ₹1,192 crore for meeting salary and establishment expenses of strengthened direct tax department, ₹2,198 crore for meeting additional expenditure towards development package to Manipur, ₹2,504 crore for meeting additional expenditure towards transfer of financial liabilities to the Union territory of Ladakh.

The government has just completed consultations for the FY27 Union budget, likely to be presented on 1 February, and is now finalising specific proposals. Mint has earlier reported that businesses and experts expect the thrust on infrastructure creation to continue, which will help cut logistics cost for businesses and improve their competitiveness, while creating new jobs.

“The extra expenditure by the government could provide fiscal challenges to the government this fiscal as nominal GDP growth projections are lower, which directly impacts the Centre’s revenue. However, things would become clearer only after December, when numbers of the third quarter akso gets analysed," D.K. Joshi, chief economist at ratings agency CRISIL Ltd, said.

India’s real GDP growth for July-September came in at a six-quarter high of 8.2%. Most forecasts had pegged it at around 7%. A year ago, Q2 growth was just 5.6%, and in Q1 of the current fiscal it was 7.8%. Nominal GDP growth, measured at current prices without adjusting for inflation, slowed to 8.7% because of low inflation. It is expected to end FY26 at below 8%, compared with 9.8% in FY25. This is a concern for the government, which assumed 10.5% nominal GDP growth in the FY26 Budget while projecting revenues.

While announcing the Union budget for fiscal year FY26 that started on 1 April, finance minister Nirmala Sitharaman set a fiscal deficit target of 4.4% of GDP. There has been a steady decline in the budget deficit from the 9.2% seen in the pandemic year of FY21. India’s fiscal deficit for FY25 stood at 4.8% of GDP, meeting the revised estimates.

The Centre had in July projected that net tax receipts would grow 11% from the previous year to ₹28.37 trillion in the current fiscal. The fiscal deficit stood at ₹8.25 trillion or 52.6% of annual target, at the end of October.

In the Union budget for FY26, the government also set a new target of lowering the Centre's debt from 57.1% in FY25 to 50% of GDP, give or take 1%, by end of March 2031. Annual fiscal deficit will be carefully calibrated to achieve this target.

The Reserve Bank of India expects real GDP to grow at 6.8% and chief economic advisor V Anantha Nageshwaran said last week that India’s economy is on track to grow 7% or north of 7% in FY26.