The Fiscal Pit: The Union Budget Plays to a Crowd of Contradictions

Dear Insighter, 

You know that moment at a festival when the air is thick with sweat and sound, and somehow, against all logic, everything just… works? I found myself in the middle of that precise, beautiful chaos at Lollapalooza in Mumbai. Fathers with toddlers on their shoulders. Teenagers with faces painted. Groups of friends who’d clearly started celebrating hours early.

Japanese sensation Fujii Kaze had thousands singing phonetically to lyrics they didn’t understand. The roar for Linkin Park was a generational scream of catharsis. Indian folk-metal band Bloodywood commanded a pit as furious and friendly as any for Yungblud or Playboi Carti, who quite literally made the ground shake. And in that heaving, oceanic mass, there was a strange, unspoken etiquette. A respect for space. A shared understanding that we were there for the same primal reason, to feel something together.

I’m not a crowd person, but I go for the people-watching, besides the music. You see every human motivation on display: joy, nostalgia, reckless abandon, quiet observation. Concerts have become their own economy in India, where collective energy creates order without enforcement. And as fireworks silhouetted the Mumbai skyline during Linkin Park’s set, it struck me that this is what India’s economic policymakers must feel like right now: trying to conduct a symphony for millions, each here for a different show, all while the stage itself is being rebuilt. The vibe is incredible. The structural soundcheck is still a work in progress.

As Duvvuri Subbarao notes, we’re still obsessing over the Centre’s fiscal deficit as if it’s the only headline act. But the festival has expanded. States now account for roughly 60% of public spending, while the Centre raises about 60% of combined revenue. The real fiscal impulse comes from a decentralised network of stages. Any assessment that ignores this 60:40 reality isn’t just incomplete. It’s misleading.

Rajesh Ramachandran views the upcoming Budget through a political lens. With key elections in states like West Bengal, Tamil Nadu, Kerala, Assam and Puducherry, terrain he describes as difficult for the ruling BJP, the Budget risks becoming a mini-election manifesto. Capital outlays become campaign chords, designed to resonate in specific regional arenas. It’s less a dry fiscal statement and more a carefully curated setlist.

But what if we’re focused on the wrong instruments altogether?

R. Gurumurthy argues that India’s real budget challenge isn’t deficit arithmetic. It’s the failure to mobilise patient capital in a capital-scarce economy. We’ve sold a staggering number of tickets—credit growth—but haven’t built enough concession stands or toilets—long-duration savings. Deposit growth lags credit, pushing banks toward bulk deposits and market borrowings. Capital markets perform maturity transformation by default.

His prescription is “intelligent restraint”: encourage saving, reward duration, mobilise inert capital, and stop forcing banks to absorb fiscal risk. In Gurumurthy’s framing, the answer isn’t clever deficit math. It’s where we choose to lean and where we choose to hold back. Tax rents, yes, but don’t tax away the foundations of capital formation.

Arvind Mayaram argues the Budget has to grow out of spreadsheet mode and into something closer to economic statecraft: building institutions that can absorb shocks from climate to technology to social stress. Ashima Goyal echoes that, calling for a three-part harmony: discipline, productivity, and institutional reform, coordinated between Centre and states if Viksit Bharat is to be more than a slogan. State Development Loans now account for nearly half of combined borrowing, keeping yields elevated. If the Centre is moving toward borrowing mainly for investment, states must be nudged in the same direction.

Backstage, the technicians are sweating. Yield Scribe warns that India’s bond market faces a brutal test in 2026–27, with nearly ₹30 trillion in supply threatening to overwhelm demand. Unless the RBI steps in as buyer of last resort, yields will stay under pressure.

Our public sector banks tell another story. K. Srinivasa Rao observes that PSB mergers created bigger balance sheets, but not necessarily better banks. Five years on, we have scale and stability, but not the bold, risk-taking artistry of global champions. Forcing more mergers, he cautions, is like bundling indie bands into a supergroup. It looks good on the poster.

TK Arun pushes the argument further. India’s budget problem, he says, isn’t size. It’s misplaced priorities. As the Centre keeps wandering deeper into state subjects, something else quietly gets squeezed: defence, R&D and strategic autonomy. In a world of tariff wars, AI-driven battlefields and permanent geopolitical churn, this is the wrong place to economise. India needs deeper investment in defence and research, and in integrated capability across land, sea, air, space and cyberspace.

The uncomfortable truth is that the money doesn’t have to come from higher taxes. It can come from stopping the Centre from paying for things the Constitution already assigns to states. That takes political courage. But that, ultimately, is what leadership looks like.

Industry, meanwhile, feels oddly detached from the Budget itself. As Sharmila Kantha points out, many of the biggest policy shifts now arrive outside the Budget: Independence Day speeches, surprise regulatory moves, mid-year announcements. Recent Budgets have done the hard, unglamorous work of fiscal consolidation and debt reduction. But reviving private investment, lifting exports and sustaining momentum will take more than tidy balance sheets. It needs faster approvals, better infrastructure, regulatory certainty and real wage growth that revives consumption.

The green stage has its own coordination failures. Sharmila Chavaly argues that India’s renewable energy push is running ahead of grid readiness. Capacity is being added faster than the grid can absorb it, straining real-time stability. The Budget must pivot from chasing megawatts to building firm power. In another piece, she makes the case for using public finance as strategic risk capital: guarantees, blended finance and smarter risk metrics to crowd in private capital. The state can’t be the sole funder. It must be the de-risker.

Amitrajeet A. Batabyal reframes the climate debate altogether. It’s not net-zero versus clean air. It’s a timing and coordination problem. India can deliver immediate health gains and long-term decarbonisation, but only if policy aligns energy, pollution control and climate strategy instead of treating them as separate silos.

Over in the manufacturing tent, Krishnadevan V throws cold water on the idea of copying the iPhone export model for auto components. Apple works because one anchor client creates gravitational pull. Auto components live in a multi-client, multi-standard universe with decade-long qualification cycles. There is no Apple. Policy must do slower, harder work: shared standards, testing capacity, engineering depth and IP ecosystems.

This brings us to the anxiety humming beneath the bassline.

Srinath Sridharan points to “elusive investments” and “silent disinvestments.” Public capex is the headline act propping up growth. Private investment remains hesitant. He calls this India’s cyclical strength, structural test. The vibe is strong. The question is whether it’s self-sustaining. Private credit is filling gaps, offering flexibility where traditional lending hesitates. But like morphine, it dulls pain without curing disease. Risk becomes invisible, not eliminated.

Abheek Barua adds an external layer of vulnerability. India’s reserves look strong. But frequent geopolitical and tech shocks can steadily erode resilience. Efforts to keep the rupee stable may blunt competitiveness, setting up sharper corrections later. More worrying: India isn’t firmly plugged into new-tech supply chains.

G. Chandrashekhar writes that agriculture remains stuck in drift and denial. It employs nearly half the workforce while contributing barely 15% to GDP. MSPs, procurement, transfers and subsidies soften distress but don’t change structure. What’s missing is accountability, technology adoption, domestic genetic research, and systematic replication of best practices. Indian agriculture doesn’t lack ideas. It lacks execution and ownership.

In another piece, Chandrashekhar warns that critical minerals—lithium, cobalt, nickel, copper, gallium, graphite—are now economic and security assets. They sit inside EVs, solar panels, electronics, defence and space systems. In a world of sanctions and resource nationalism, access isn’t guaranteed. For an economy scaling manufacturing, this isn’t a side-show. It’s core strategy.

Vijay Chauhan urges a focus on the next mile: shifting from headline growth to private investment, jobs and growth quality. As fiscal stimulus tapers, the handover to private capital becomes the real test. Regional balance matters too.

Pulling it together, Sridharan captures the central tension. By global standards, India is the fastest-growing large economy. The upside surprises continue. But beneath the optimism lies an unresolved question: is growth structurally self-sustaining, or riding a cyclical wave powered disproportionately by the state? The challenge now is to use cyclical strength to engineer structural handover, from the volume of public spending to the quality of private response.

Standing in that crowd, watching strangers create spontaneous order through shared energy and mutual respect, I couldn’t help thinking: this is what our economy needs. Not the chaos (we have plenty of that) but the choreography. The ability to let multiple performances happen without trampling each other. The trust that boundaries will be respected without constant enforcement.

A festival is temporary. The next day, the stages are dismantled and the city returns to work. That’s our Budget moment. The music of strong GDP numbers is playing. The mood is oddly hopeful. But the test is whether we’re just enjoying a great weekend, or actually building the sound system, the grid, and the crowd etiquette to host an even greater show next year, and every year after.

The headline acts of public capex have drawn us in. Now, the entire, sprawling, multifaceted festival economy has to find its own rhythm. The crowd is ready. The question is whether management has a plan… or just a playlist.

Until next time, yours in the pit.

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