FEBRUARY 04, 2026

Budget After the Debates: Ledger Speaks

By Vijay Kumar

A record in Indian fiscal history - nine consecutive Union Budgets by a Finance Minister. Nine rounds of fiscal déjà vu. This year, it was on a Sunday - proving that budget doesn't take weekends off.

The experts have analysed it through hours of prime-time TV. Now that markets have settled and perhaps everyone is back to business, let's talk budget, not the usual highbrow economics stuff. Jest plain Budget.

Budgets are same every year - Budgets are reruns - fiscal discipline is the headline, capital expenditure the buzzword, and debt the shadow that never lifts. Interest is the budget's black hole, swallowing more than defence, health and education combined. The rupee is the restless traveller, forever shifting between receipts and expenditure, never quite settling the account - where it comes from and where it goes.

Let's decode the budget jargon - behind the fiscal gloss lies the same old arithmetic.

Strip away the jargon, and you're left with two columns: money in, money out. Receipts and Expenditure.

The two major heads are Receipts and Expenditure .

Receipts are of two types - Revenue Receipts and Capital Receipts.

Again, Revenue Receipts are two, tax revenue and non-tax revenue.

Capital Receipts are three types -1) Recoveries of loans, 2) Other receipts, and 3) Borrowings and other liabilities

Total Receipts = Revenue Receipts + Capital Receipts.

Similarly, expenditure has two heads, on Revenue Account and on Capital Account. Revenue expenditure includes interest payments.

Deficits are the recurring potholes of every budget. There are three kinds of deficits, Revenue Deficit, Fiscal Deficit and Primary deficit .

Revenue Deficit is the difference between Revenue Receipts and Revenue Expenditure

Fiscal deficit is the difference between the sum of (Revenue Receipts, Recoveries of loans and other receipts) and Total Expenditure.

Primary deficit is the difference between fiscal deficit and interest payments.

Look at Budget 2026-2027

Of the total revenue receipts of 35,33,150 crores, 28,66,922 crores come from taxes (only the taxes net to the centre). The capital receipt of about eighteen lakh Crores includes borrowings and liabilities of about seventeen lakh crores. Of the total expenditure of 53,47,315 crores, 14,03,972 crores account for interest payment.

Where does this Rs. 53,47,315 go? As per the Budget Estimates for 2026-2027, these are the major items on which our money is spent.

You will see Interest is the budget's heavyweight - outweighing defence, health and education put together.

DEBT POSITION OF THE GOVERNMENT OF INDIA

As we unveil the financial tale of the Government of India, the outstanding debt and liabilities at the end of 2026-2027 are estimated to be a whopping 214,82,050 crores. Debt is the endless treadmill - even the most seasoned economists pant at its pace.

Internal Debt comprises loans raised in the open market, Compensation and other bonds, etc. It also includes borrowings through treasury bills including treasury bills issued to State Governments, Commercial Banks and other investors, as well as non- negotiable, non-interest-bearing rupee securities issued to international financial institutions.

In addition, Government is liable to repay the outstanding against the various Small Savings schemes, Provident Funds, securities issued to Industrial Development Bank of India, and Nationalized Banks, Oil marketing companies, Fertilizer companies, Food Corporation of India and deposits under the Special Deposit Scheme and depreciation and other interest-bearing reserve funds of departmental commercial undertakings, etc., deposits of local funds and civil deposits.

Assets of the Government - the overlooked entries.

Government is not all about liabilities, debts and interest. We have assets too.

Pakistan Dues - The Perpetual Footnote

I am never tired of repeating this tale of debts and dues - a never-ending series that started back in 1947 and hasn't wrapped up yet.

There is one item consistent and uniform in all Union Budgets from 1950. In the STATEMENT OF LIABILITIES OF THE CENTRAL GOVERNMENT in the Receipts Budget of India, 2026-27, you will find certain interesting figures. The Total Liabilities are Rs. 214,82,350 Crores. From this, an amount of Rs. 300 crore is deducted and the net liability is shown as Rs. 214,82,050 Crores.

Now, what's this mysterious Rs. 300 Crores? This is the "Amount due from Pakistan on account of share of Pre-partition debt".

This same amount had been shown consistently in all our budgets since 1950, including this year's.

In 1950-51, when our total liability was Rs. 2865 Crores, this 300 Crores was deducted to arrive at Rs. 2565 Crores. Thus, the dues from Pakistan constituted slightly more than 10 percent of our liabilities.

And the ledger thickens! Pakistan isn't one to be left out. Interestingly, The State Bank of Pakistan proudly displays an amount of Rs. 3456,39,56,000 for the year 2025 as Provision for other doubtful assets - Provision against assets held with / receivable from the Government of India and the Reserve Bank of India - Pakistan's side of the debt dilemma.

Who owes whom?

Why are Dues from Pakistan shown in Statement of Liabilities of Central Government?

The position of the undivided Government as on the date of partition was that its outstanding liabilities exceeded its assets so that ultimately it was the debt that was being divided between the two Governments. On a rough estimate the outstanding debt of the Central Government as on the 14th of August 1947, was likely to be of the order of Rs. 3,300 crores.

Included in this is not merely the outstanding public debt but

1. All its obligations to outside parties such as deposits in Postal Savings Banks,

2. Outstanding balances of Post Office Cash and National Savings Certificates,

3. Provident Fund Deposits of Government servants,

4. Amount likely to be paid to the British Government for surplus stores.

In his Budget Speech of 1948, Finance Minister Shanmukham Chetty said,

On a very rough estimate this debt is likely to be of the order of Rs. 300 crores and the rate of interest may be near about 3 per cent. Pakistan's total debt is to be repaid in Indian rupees in fifty annual equated instalments for principal and interest. As a measure of assistance to the new Dominion in its earlier years, it has been agreed that the first repayment should commence only in 1952.

That was in 1948, but when it came to payment, nothing came.

In the 1952-53, budget, credit had been taken for a recovery of Rs. 9 crores from Pakistan as the first instalment of its debt repayment to India, but not a paisa came.

In his 1954 Budget Speech, Finance Minister Deshmukh said,

the budget for the current year placed the revenue at Rs. 439.26 crores and the expenditure at Rs. 438.81 crores leaving a nominal surplus of Rs. 45 lakhs. In balancing this budget, I had taken credit for a recovery of Rs. 18 crores from Pakistan on account of two instalments due from that country in repayment of the partition debt. I have been having discussions on this subject with the Finance Minister of Pakistan and we both hope that it will be possible to commence the repayment of the debt in the coming year. This single factor has made for a deterioration of Rs. 18 crores in the revenue budget for the current year and converted the surplus of Rs. 45 lakhs into a deficit of Rs. 16. 96 crores.

In the next year's budget speech, he said,

I am not taking any credit for repayment of partition debt by Pakistan in view of what has happened in the last two years.

So, will we ever collect these mythical dues from Pakistan? It remains the most stubborn line item in Indian accounting history.