Budget 2026: States Flag Shrinking Fiscal Space And Revenue Pressures At Pre-Budget Meet
While GST rationalisation was described as pro-people, states cautioned that it has hit state finances hard, limiting room for spending.
States raised concerns over shrinking fiscal space and revenue pressures at a pre-Budget consultation with Nirmala Sitharaman, flagging the impact of recent tax changes on their finances.
At the meeting, attended by finance ministers and senior representatives from several states and Union Territories, states said mid-year GST rate cuts have led to revenue losses, tightening budgets ahead of the Union Budget. While GST rationalisation was described as pro-people, states cautioned that it has hit state finances hard, limiting room for spending.
Several states sought compensation or a share in new cess or excise revenues, particularly from products such as tobacco and paan masala, to offset the shortfall. They argued that such levies contribute meaningfully to overall collections but offer limited direct relief to state revenues under the current framework.
States also called for a fairer Centre-State funding structure for centrally sponsored schemes, pointing to pressure created by existing cost-sharing arrangements. Demands were raised for higher capital expenditure support from the Centre, along with greater clarity on long-term funding, to enable better planning and execution.
The concerns were conveyed as part of the pre-Budget consultation process, with states urging that fiscal constraints be factored into Budget decisions.
Sitharaman will present the Union Budget 2026-27 on an unorthodox day of the week, being Sunday, Feb. 01, 2026. The Union Budget is set to be presented on a Sunday for the first time in decades.
The Economic Survey will be tabled on Jan. 20, before the budget is presented. In a post on social media platform 'X', Kiren Rijiju said the session has received approved from President Droupadi Murmu on the Union government's recommendation.
The first part of the budget session of Parliament will be held between Jan. 28 and Feb.13, whereas the second part of the session is set to be conducted between March 9 and April 2.
