The Union Budget is the backbone of governance in a large and diverse country like India, where economic disparity varies considerably from one region to another and from one state within a region to another. The Budget outlines how the government plans to raise and spend public money in a financial year, and is crucial for converting policy promises into action and managing finite resources to drive economic growth and social welfare. However, beyond tax changes and spending announcements, the Budget document is never only about economics. The political dimension of a Budget can never be ignored. Precedents indicate that fiscal priorities are influenced by elections or other considerations to send a clear message to the electorate.

Focus on poll-bound states

Because the political dimension has a significant correlation to the annual accounting exercise, this year’s Budget, scheduled for Sunday, will be closely watched for signs of targeted allocations or policy incentives for four states going to polls in the next few months—Tamil Nadu, West Bengal, Kerala and Assam—even as the government stresses fiscal discipline and the Viksit Bharat narrative. Except for Assam, the other three poll-bound states have non-NDA governments. Political observers and analysts do not rule out electoral compulsions for the finance minister to announce targeted inducements for these states or signal responsiveness to regional demands, though prudence and not populism should be the underlying theme of the Budget.

Precedents of budgetary signalling

In recent years, the central government has been accused of overtly using budgetary signalling to influence........

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