Public Finance and Fiscal Policy — Current Affairs 2026

Current Affairs Connections

Recent developments and news linked to Public Finance and Fiscal Policy.

GST Council Deliberates on Rate Rationalization and Inclusion of Petroleum Products

Ongoing discussions in 2024-2025

The GST Council continues its deliberations on various aspects of the Goods and Services Tax, including potential rate rationalization to simplify the multi-slab structure and the long-standing issue of bringing petroleum products, natural gas, and electricity under the GST regime. While no immediate decision is expected due to revenue implications for states, discussions highlight the ongoing evolution of India's indirect tax system. Any move to rationalize rates or expand GST's ambit would have significant implications for inflation, state revenues, and the 'one nation, one tax' vision.

UPSC Angle: This topic is highly relevant for Mains, particularly for questions on tax reforms, fiscal federalism, and the challenges of GST implementation. Prelims could ask about the current items outside GST or the structure of the GST Council. Aspirants should understand the arguments for and against including petroleum products, the impact on Centre-State financial relations, and the potential benefits of further GST simplification. The role of the GST Council as a cooperative federal body is also a key area of focus.

Background (2024)

Earlier events that provide context for this topic.

Union Budget 2024-25: Fiscal Deficit Target Set at 5.1% of GDP for FY25

February 1, 2024

The Interim Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman, set an ambitious fiscal deficit target of 5.1% of GDP for the upcoming financial year (FY25), down from the revised estimate of 5.8% for FY24. This signals the government's continued commitment to fiscal consolidation, aiming to bring the deficit below 4.5% by FY26. The budget also emphasized a significant increase in capital expenditure to boost economic growth and job creation, balancing fiscal prudence with growth imperatives. This move is crucial for maintaining macroeconomic stability and attracting both domestic and foreign investment.

UPSC Angle: This is a direct and high-priority topic for both Prelims and Mains. Prelims questions can focus on the exact fiscal deficit numbers (current and target), capital expenditure outlay, and the government's fiscal consolidation roadmap. Mains questions can delve into the implications of these targets for economic growth, debt sustainability, and the trade-offs between fiscal consolidation and growth stimulus. Aspirants should analyze the budget's underlying assumptions and potential challenges in achieving these targets.

RBI's Record Dividend Transfer to Government Boosts Non-Tax Revenue

May 2024

The Reserve Bank of India (RBI) announced a record surplus transfer (dividend) to the government for the financial year 2023-24, significantly exceeding previous years' transfers and budgetary estimates. This substantial inflow from the central bank provides a crucial boost to the government's non-tax revenue, offering additional fiscal space. The higher dividend is attributed to factors like increased interest earnings on foreign exchange reserves and higher domestic interest rates. This unexpected windfall can help the government meet its fiscal deficit targets or fund additional expenditures without resorting to further borrowings.

UPSC Angle: This event is relevant for understanding government revenue sources, particularly non-tax revenue. Prelims questions could ask about the components of non-tax revenue or the role of RBI in contributing to government finances. Mains questions could explore the implications of such transfers on fiscal consolidation, the independence of the RBI, and the overall health of public finances. Aspirants should analyze how such windfalls impact budgetary planning and the government's ability to manage its fiscal position.