This strong domestic performance comes as Finance Minister Nirmala Sitharaman prepares for Budget 2026, which is expected to reinforce the government’s commitment to strategic spending and economic stability amid complex global challenges.
Budget 2026: GST collections hold steady after rate cuts
The government’s Goods and Services Tax (GST) collections have displayed noteworthy stability in the current fiscal year (FY2025-26), even after the comprehensive GST 2.0 rate rationalisation implemented in September 2025.
Gross GST revenue for November 2025 was recorded at Rs 1,70,276 crore, marking a marginal increase of 0.7% year-on-year. While this represents the slowest growth in the fiscal year, officials note that the collections are broadly on expected lines following the sweeping rate cuts.
Crucially, cumulative gross collections from April to November 2025 reached Rs 14,75,488 crore, demonstrating a robust 8.9% annual growth. This sustained performance is a significant indicator of ongoing economic activity and better compliance.
Union Budget: The impact of ‘GST 2.0’
The stability in collections follows the biggest overhaul of the indirect tax system since its 2017 inception.
GST 2.0 simplified the multi-tiered structure into a streamlined system, primarily featuring a 5% ‘merit rate’ for essentials and an 18% ‘standard rate’ for most other goods and services, alongside a new 40% rate for select luxury items.
The reform was pitched as a major consumption booster, directly reducing taxes on essential goods like personal care products, packaged food items, and even certain small cars, leaving more disposable income in the hands of consumers.
While the short-term goal of boosting household spending appears to be driving taxable value growth, the government is closely monitoring collection trends to assess the full long-term impact.
Budget 2026 to follow fiscal roadmap
The healthy tax revenue stream places Finance Minister Sitharaman in a strong position to adhere to the government’s fiscal glide path.
The Budget 2025 had already set the fiscal deficit target for FY2026 at 4.4% of GDP, aligning with the commitment to narrow the gap to below 4.5% by FY2026.
This commitment to fiscal prudence is crucial for maintaining global investor confidence.
The Budget is expected to continue focusing on high capital expenditure (capex), which was targeted at a record Rs 11.21 lakh crore for the previous fiscal year, as a primary engine for sustainable, long-term economic growth, particularly through infrastructure development.
Budget News: Global headwinds & domestic resilience
India’s economic fundamentals remain a beacon of strength against a backdrop of global economic uncertainty, including geopolitical tensions in the Middle East and Europe, persistently high inflation in many developed economies, and a significant trade shock from the United States.
A major external challenge is the aggressive tariff policy implemented by the US administration in 2025. Following an initial 25% duty, the US hiked tariffs on a large portion of Indian exports to 50% by late August, making Indian goods among the most heavily taxed of any major US trading partner.
This measure, partly linked to geopolitical friction over India’s continued imports of Russian oil, has severely impacted bilateral trade.
Also Read | Budget 2026: A close look at India’s GDP growth rate before Sitharaman’s key announcements in Lok Sabha
Meanwhile, back home, the narrative of India’s economy has shifted from mere resilience to accelerated growth, while inflation has eased significantly, altering the Reserve Bank of India’s (RBI) monetary policy calculus.
Far from experiencing a deceleration, the Indian economy delivered a major upside surprise, accelerating to a six-quarter high in the second quarter of the current fiscal year (FY2025-26) as it quickened to 8.2%, beating estimates.
This robust performance was driven primarily by a surge in the manufacturing sector, which grew 9.1% year-on-year, and strong expansion in the services sector. The momentum was supported by private consumer spending (which accounts for nearly 60% of GDP) and continued high government capital expenditure.
However, the upcoming Budget, the third in Prime Minister Narendra Modi’s third term, faces the unique challenge of balancing national growth objectives with the priorities of the established coalition government.