Finance Ministry directs central ministries to prepare realistic estimates for 2027-28 Union Budget

Synopsis

As the 2027-28 Union Budget approaches, central ministries are tasked with crafting practical fiscal estimates. The Finance Ministry emphasizes the importance of controlling expenditures and increasing revenue. Pre-Budget meetings, starting in October 2026, will focus on refining these estimates. Ministries are advised to prioritize funding for ongoing projects before introducing new schemes, while also working to boost non-tax revenue and evaluate current programs.

The Finance Ministry has directed central ministries and departments to prepare realistic expenditure and revenue estimates for the 2027-28 Union Budget, with a focus on controlling spending, rationalising government schemes and improving non-tax revenue collections.

The pre-Budget meetings, chaired by the Secretary (Expenditure), will begin on October 12, 2026 and continue until mid-November, according to the Budget Circular 2027-28 issued by the Budget Division of the Department of Economic Affairs on August 27.

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The circular sets out the framework for preparing the Revised Estimates for 2026-27 and Budget Estimates for 2027-28. Ministries have been asked to submit information required for the Budget exercise by October 6, while estimates of tax receipts are due by October 15.

The Finance Ministry has asked ministries to first provide for all committed and continuing expenditure before seeking allocations for new schemes or expenditure items. Estimates are to factor in actual expenditure up to September 2026, spending during the corresponding period of the previous year, pending arrears, unspent balances and other expected expenditure.

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The government has also called for greater scrutiny of existing schemes. Discontinued schemes should not be included in the Revised Estimates for 2026-27, while schemes that will not continue beyond 2026-27 should not receive allocations in the 2027-28 Budget.

Expenditure projections for new and continuing Central Sector Schemes, Centrally Sponsored Schemes and projects must remain within the limits prescribed by the Department of Expenditure.

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The ministry has also directed departments to avoid large savings and surrender of funds at the end of the financial year. The circular notes that Parliamentary Committees have repeatedly expressed concern over large savings in grants. Savings of ₹100 crore or more in a grant are required to be explained to the Public Accounts Committee.

Focus on non-tax revenue

Ministries and departments have been asked to provide details of non-tax revenue, including user charges and arrears, and outline measures to improve collections.

The circular asks ministries to consider changes to user charges levied by departments, ministries and autonomous bodies to recover the current cost of providing services along with a reasonable return on capital investment.

Departments have also been asked to provide details of efforts to recover arrears of non-tax revenue.

For subsidies, ministries have been instructed to clearly state the assumptions used to calculate subsidy requirements.

Finance Commission-linked requirements

The Budget exercise has also been linked to the 16th Finance Commission cycle. Existing schemes proposed to continue during the new Finance Commission period will have to be appraised and approved by the competent authority.

Ministries are required to forward the final EFC memoranda to the Department of Expenditure before their pre-Budget meetings.

Final expenditure ceilings are expected to be reflected in the Union Budget Information System by the end of December 2026. The deadline for GDP estimates from the CSO is January 7, 2027.

Budget-related data is to be submitted through the Union Budget Information System, with ministries required to maintain confidentiality during the Budget preparation process.

The circular does not specify the size of the 2027-28 Budget, tax changes, subsidy cuts or allocations for individual schemes. These will be determined as the Budget formulation process progresses.