Buoyed by surging tax revenues, the Indian government is expected to maintain its fiscal consolidation trajectory in the next Union Budget, according to a comprehensive new report. Direct taxes have jumped 18% year-on-year, while GST mop-ups reflect strong consumption revival.
This fiscal strength stems from structural reforms over the past decade. The Goods and Services Tax regime has streamlined collections, with monthly hauls routinely exceeding expectations. Simultaneously, personal income tax returns soared past 7 crore, underscoring deepening financial inclusion and compliance culture.
The report underscores the government’s commitment to fiscal responsibility. After navigating pandemic-induced deficits, New Delhi has engineered a sharp turnaround. Borrowings are down, and capex has been ramped up to 3.3% of GDP, fueling a multi-year infra boom.
Looking ahead, projections indicate gross tax revenue crossing ₹32 lakh crore in FY25. This provides elbow room for populist measures without derailing consolidation goals. Rating agencies like Moody’s have praised this approach, signaling potential upgrades.
Yet, upside risks and headwinds coexist. Global commodity shocks could inflate subsidies, while domestic consumption slowdowns merit monitoring. The think tank advocates for expenditure rationalization, particularly in non-essential areas, to free resources for productive investments.
Budget preparations are underway with inter-ministerial consultations. Expectations center on enhanced allocations for railways, highways, and renewable energy, alongside tax relief for the middle class. Strengthening the insolvency framework could further boost recovery rates from stressed assets.
Ultimately, this tax revenue surge validates India’s reform narrative. By sticking to fiscal anchors, the government can navigate uncertainties, foster private investment, and realize the Viksit Bharat vision by 2047.
