Assessing Fiscal Policy Effectiveness in India’s Union Budget 2025-26 Using Dynamic Econometric Models

The Union Budget 2025-26 is a crucial financial plan aimed at driving India's economic growth through strategic fiscal policies. This paper evaluates the budget's projected growth using an advanced econometric approach. We employ a Dynamic Structural Vector Autoregression (DSVAR) model, incorporating government expenditure, tax revenue, inflation, interest rates, foreign direct investment (FDI), exchange rates, employment levels, private sector investment, and consumer sentiment. Primary data collection through business surveys, expert interviews, and consumer confidence indices enhances the model's reliability. The findings indicate that the budget’s fiscal policies will likely result in GDP growth between 6.3% and 6.8%, contingent upon external macroeconomic conditions and policy effectiveness.