With the new year starting, the two immediate policies that are awaited are the budget and the credit policy. The credit policy will come just after the budget is announced and will also be the last one for FY26. The budget will come just after the FOMC meeting, and while it has no bearing on its content, the RBI will also pay attention to what the Federal Reserve has in mind. What can one expect from these policies?

Fiscal deficit path under focus

The budget to be presented will be special for several reasons. The first is that the path of the fiscal deficit will be tracked. Post-Covid, there has been a tendency for the deficit to be rolled back. While a 3% ratio is the ideal level, it is not possible to do so at one stroke and has to be done in a phased manner.

Pay Commission and food subsidy concerns

Second, this budget will also have to keep in mind the impact of the possible recommendations of the Pay Commission. While the direct impact will not be in FY27, a call has to be taken on whether provisions have to be made for the arrears component as and when the new dispensation is enforced. Third, there has to be internal discussion on the free food project, which is set to end by December 2028. A plan to roll back the same has to be put in........

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