Union Budget

The government's annual financial statement — its complete plan for what it expects to earn and spend in the coming financial year.

Explain it like I'm 10

Think of the Union Budget as the country's household budget spreadsheet, presented once a year in Parliament — one column lists every rupee the government expects to bring in (taxes, fees, borrowings), the other lists every rupee it plans to spend (salaries, subsidies, roads, defence, interest on old loans), and the Finance Minister walks the entire country through it on live television every 1 February. It's not just an accounting exercise — the choices about which column gets more attention are, in effect, the government's statement of its priorities for the year.

The formula

Total Expenditure = Revenue Expenditure + Capital Expenditure

Worked example, FY26-27 (Budget Estimate):
  Total Expenditure      = ₹53.47 lakh crore
    Revenue Expenditure  = ₹41.25 lakh crore  (77.2%)
    Capital Expenditure  = ₹12.22 lakh crore  (22.8%)
  Revenue Receipts       = ₹35.33 lakh crore

What it's made of

Revenue Expenditure+77.2%

Day-to-day running costs — salaries, pensions, interest payments, subsidies — that don't create a lasting asset.

Capital Expenditure+22.8%

Spending that builds durable assets — roads, railways, defence equipment, ports — meant to add to the economy's productive capacity.

Who calculates it

The Union Ministry of Finance drafts the budget; it is presented by the Finance Minister in the Lok Sabha on 1 February each year and, after Parliamentary approval, takes effect from 1 April.

Where this number can mislead you

⚠Budget Estimates (BE) presented in February routinely diverge from the Revised Estimates (RE) released the following February, and both can differ further from final audited figures — the number you read on Budget day is a plan, not an outcome.
⚠Some items classified as "capital expenditure" — like loans to states for their own capex, or equity infusion into public sector banks — build durable assets only indirectly, which can flatter the headline capex share.
⚠Supplementary demands for grants during the year add spending beyond what was originally budgeted, so the full-year actual expenditure is rarely identical to the February plan.
⚠A rising capital expenditure share is often read as unambiguously positive for growth, but the quality and execution speed of that capex matters as much as its budgeted size — underspent capex allocations are a recurring pattern.

Reality check

In the FY26-27 Union Budget, total expenditure of ₹53.47 lakh crore was split roughly 77:23 between revenue and capital spending — a capital expenditure share that has been rising for several years running, reflecting the government's stated preference for growth-oriented, asset-building spending over pure consumption spending, even as the fiscal deficit itself continued to narrow toward 4.3% of GDP.

Test yourself

Question 1 of 5Score: 0

What is the fundamental difference between Revenue and Capital Expenditure in the Union Budget?