Ministries have also been told to include proper expenditure estimation in their proposals to obviate the need for routine, frequent mid-year re-appropriations, said the person.
Ministries and departments have also been explicitly told to ensure that all allocations sought are in line with the approval of the competent authority, the person said.
Finance ministry also plans to start its annual pre-budget consultations with various stakeholders from agriculture, small and medium enterprises, industry, social sector and others from October 12, 2026.
Usually, agriculture is the first sector that meets top officials in the finance ministry to put forward their proposals for inclusion in the Union Budget.
Queries sent to the finance ministry seeking comments for the story remained unanswered at the time of publishing.
FY28 Union Budget is being prepared amid the ongoing crisis in West Asia which flared up after the FY27 Budget was presented 1 February. The conflict began on 28 February.
The crisis has pushed up global prices of several commodities including fertilisers, liquefied natural gas and also chemicals that are majorly shipped through the Strait of Hormuz, which remains at the Centre of the US-Iran conflict.
Latest estimates show that India has already exhausted more than half of the ₹1.70 trillion fertiliser subsidy budgeted for FY27.
Not only that, food subsidy bill is also projected to surpass the FY27 budget estimate of ₹2.28 trillion and might touch ₹2.5 trillion due to higher minimum support price and increased procurement of wheat and paddy.
Latest data from Controller General of Accounts (CGA) shows that the Central government received almost 29 per cent of its FY-27 Budgeted estimate of total receipts of around ₹36.5 trillion in the first three months of this fiscal which is slightly more than 27 per cent of the BE during the corresponding period last year.
When it comes to expenditure, the government has spent around 25.4 per cent of the Budget Estimate of ₹53.4 trillion which is slightly more than 24.1 per cent of the same period last year.
Central government has spent around 28 per cent of its FY27 capital expenditure budget of ₹12.21 trillion in the first three months, compared to around 24.5 per cent during the corresponding period a year ago.
The overall size of the FY28 budget could go up by about 4-5 per cent, said Madan Sabnavis, chief economist at Bank of Baroda.
The total spending estimated in the FY27 budget is ₹53.5 trillion.
Capital expenditure is also likely to increase by the same measure in FY28, Sabnavis said.
On the fiscal deficit front, Sabnavis expects only a gradual correction in the FY-28 Budget.
“While the deficit could come down from around 4.3 per cent to about 4 per cent, there is unlikely to be anything dramatic,” Sabnavis said.
He said the FY-28 budget could therefore see modest fiscal consolidation. There will be pressure this year from higher expenditure, particularly on subsidies, so there could be some slippage, he said.
“When I say 4 per cent, what I mean is that the fiscal deficit could be around 0.2-0.3 percentage points lower than the revised estimate (for FY27),” Sabnavis said.
He said there will be some advantage from a higher nominal GDP base. Nominal GDP growth, according to Sabnavis, may not be 10 per cent but could be around 11 per cent because of inflation.
The government’s last monthly economic review released in July 2026 for FY27 said that notwithstanding the uncertain global environment, the Indian economy sustained its growth momentum during the first quarter of FY27, supported by resilient domestic demand.
