The Finance Ministry has initiated the budget exercise for financial year 2027-28, urging ministries to provide realistic expenditure projections as the government grapples with mounting subsidy costs and geopolitical pressures.
The move comes as rising fertiliser and fuel subsidies, driven by the ongoing West Asia crisis, threaten to strain government finances.
Government departments have been asked to prepare accurate budget estimates, with authorities emphasising the need for practical expenditure limits.
The call for realistic projections follows concerns raised by audit authorities and the Public Accounts Committee that budget estimates are often unrealistic, while supplementary demands obtained from Parliament remain underutilised.
The timing of the FY28 budget exercise reflects increasing fiscal challenges.
India’s fertiliser subsidy bill for the current fiscal year is expected to exceed the budgetary allocation of Rs 1.71 lakh crore, with costs of imported urea and other fertilisers rising due to disruptions in West Asia. Further, global crude oil prices have also surged due to the ongoing crisis.
The Home Ministry has separately directed its departments to undertake thorough ground-level assessments for accurate projections, prioritising activities and identifying schemes that may be eliminated.
During August-September annually, all ministries send proposals to the Finance Ministry seeking revised budget estimates based on expenditure incurred during the first half of the financial year.
The budget preparation process comes against the backdrop of India’s fiscal consolidation efforts.
The Union Budget 2026-27, presented in February, set total expenditures at Rs 53.5 lakh crore with a fiscal deficit target of 4.3 per cent of GDP.
The government aims to gradually reduce the debt-to-GDP ratio to 50 per cent by 2031, while managing the dual challenge of sustaining economic growth and maintaining fiscal discipline amidst volatile global conditions.
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