Union Budget 2025-26: A
Critical Analysis
Introduction
In a highly anticipated move,
Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26,
outlining the government's roadmap for economic development, fiscal management,
and social welfare. As the last full budget before the 2026 general elections,
this budget carries immense significance in shaping India's economic
trajectory. It aims to accelerate economic growth, support domestic
manufacturing, and foster job creation while maintaining fiscal discipline.
The budget introduces substantial
reforms across taxation, infrastructure, agriculture, social security, and
innovation. With a strong focus on the middle class, youth, women, and farmers,
the government seeks to strike a balance between populist measures and
long-term economic sustainability. However, the budget has also sparked debates
on whether it sufficiently addresses pressing challenges such as inflation,
unemployment, and global economic uncertainties.
In this article, we will
comprehensively analyze the key provisions of the Union Budget 2025-26,
examining its impact on different sectors, evaluating its strengths and
weaknesses, and exploring the broader implications for India's economy and
citizens.
1. Overview of the Union
Budget 2025-26
The Union Budget 2025-26 lays
down the government’s financial blueprint for the upcoming fiscal year. The
total expenditure for the year is projected at ₹50.65 lakh crore,
marking a 7.4% increase over the previous year’s revised
estimates. The budget emphasizes capital expenditure, social welfare programs,
and tax reforms while keeping the fiscal deficit target at 4.4% of GDP.
Key Highlights of the Budget
- Total Expenditure: ₹50.65 lakh crore
- Capital Expenditure: ₹11.21 lakh crore
- Fiscal Deficit Target: 4.4% of GDP
- GST Revenue Target: ₹11.78 lakh crore
- Agriculture and Rural Development Allocation:
₹3.9 lakh crore
- Health Sector Allocation: ₹2.3 lakh crore
- Education Sector Allocation: ₹1.9 lakh crore
- Research and Innovation Fund: ₹20,000 crore
- Defense Budget: ₹6.2 lakh crore
This budget attempts to bolster
economic resilience by encouraging private sector investment,
infrastructure development, and export growth. However, the effectiveness
of these measures will depend on their implementation and global economic
conditions.
Taxation Reforms: A Push
for Growth and Compliance
One of the most anticipated
aspects of the Union Budget each year is tax policy. This year’s budget
introduces key changes in personal income tax, corporate tax, and
indirect taxes to boost disposable income and economic activity.
Personal Income Tax
The finance minister announced
a major tax relief for salaried individuals by increasing
the tax-free income slab under the new tax regime.
New Tax Regime Slabs for
2025-26
|
Income Range (₹) |
Tax Rate (New Regime) |
|
Up to 12 lakh |
0% |
|
12 - 15 lakh |
5% |
|
15 - 20 lakh |
10% |
|
20 - 30 lakh |
15% |
|
Above 30 lakh |
30% |
- The tax exemption limit has been raised
from ₹7 lakh to ₹12 lakh, benefiting middle-class earners.
- Standard deductions remain unchanged at ₹50,000
per annum.
- The new tax regime continues to be the
default, but taxpayers can opt for the old regime if they prefer.
Corporate Tax
- No changes in the existing corporate tax rate (25%
for firms with a turnover below ₹400 crore and 30% for others).
- Startups incorporated until March 2026 will
continue to receive tax holidays for the first three
years.
- MSMEs will receive a 5% reduction in
compliance-related penalties to ease business operations.
Goods and Services Tax
(GST) and Indirect Taxes
- GST revenue is projected at ₹11.78 lakh
crore, with measures to simplify compliance for small
businesses.
- Reduction in GST rates on daily essentials,
electric vehicles, and digital services.
- Customs duty reduced on components for mobile
phones, semiconductors, and lithium-ion batteries to boost local
manufacturing.
These tax measures are expected
to enhance consumer spending, promote investment, and simplify
compliance, but concerns remain about revenue generation to meet
expenditure commitments.
Infrastructure Development:
Driving Growth through Investments
The government has significantly
increased capital expenditure to ₹11.21 lakh crore, focusing on
highways, railways, ports, and smart cities.
National Infrastructure
Pipeline (NIP)
- ₹3 lakh crore allocated for road and
highway projects, including new expressways and rural connectivity
schemes.
- Expansion of metro networks in Tier-2 and
Tier-3 cities.
- ₹1.5 lakh crore for modernizing Indian Railways,
including high-speed corridors and electrification.
Urban Development and
Smart Cities
- ₹75,000 crore for urban infrastructure development,
including waste management and affordable housing.
- "Smart City 2.0" initiative to upgrade
technology and digital infrastructure in existing smart cities.
Renewable Energy and
Green Infrastructure
- ₹1.2 lakh crore for renewable energy projects,
including solar, wind, and hydrogen energy initiatives.
- Expansion of electric vehicle (EV) charging
networks with subsidies for EV buyers.
Infrastructure development is
expected to boost employment, improve logistics, and attract foreign
investments, making India a competitive global economy.
Agricultural
Initiatives: Strengthening Farmers and Rural Economy
Agriculture remains the backbone
of India’s economy, and the budget introduces several measures to support
farmers, enhance productivity, and ensure food security.
Prime Minister
Dhan-Dhaanya Krishi Yojana
A new scheme aimed at increasing
farmers' income through technology-driven solutions and better access to credit.
- Interest-free farm loans up to ₹5 lakh under
the Kisan Credit Card.
- ₹50,000 crore allocated for agricultural
research, mechanization, and irrigation.
Pulses Self-Reliance
Mission
Aiming to reduce import
dependence on pulses like Tur, Urad, and Masoor.
- ₹12,000 crore investment in high-yield
seeds and irrigation.
- 50% subsidy on pulses production for small farmers.
Digital Agriculture and
Precision Farming
- ₹10,000 crore for AI-driven solutions in
agriculture, including automated soil testing and precision farming
techniques.
- Expansion of E-NAM (National Agricultural
Market) for direct farmer-to-consumer sales.
These measures aim to increase
rural incomes, improve food security, and modernize Indian agriculture while
reducing the reliance on imports.
Research, Innovation,
and Startups: Fueling India's Future
Research and Development
(R&D) Allocation
- ₹20,000 crore set aside for a private
sector-driven research, development, and innovation initiative.
- ₹10,000 fellowships under the Prime
Minister Research Fellowship (PMRF) for technological
advancements in IITs and IISc.
Gene Bank for
Agricultural Research
- India’s second gene bank will
house 10 lakh germplasm lines to preserve crop
diversity.
- ₹2,000 crore allocated for biotechnology
research in food security.
Electric Mobility and
Semiconductor Industry
- ₹25,000 crore investment in India’s semiconductor
and EV battery industry.
- Duty exemptions on raw materials for EVs and
semiconductor chip manufacturing.
These initiatives aim to position
India as a global leader in innovation, strengthening the
country’s manufacturing, digital economy, and green technology sectors.
Export Promotion and
Trade Policies: Strengthening Global Competitiveness
India's export sector plays a
crucial role in economic growth, and this year's budget focuses on boosting
domestic manufacturing and promoting exports through tax incentives and trade
facilitation measures.
Electronics and Electric
Vehicles (EVs)
To strengthen India's position as
a global manufacturing hub for electronics and EVs, the budget
includes:
- Customs duty exemptions on open cells
used in LED/LCD TVs, semiconductor chips, and lithium-ion battery
components.
- Additional ₹10,000 crore under the
Production Linked Incentive (PLI) scheme for electronics and
semiconductor manufacturing.
- Incentives for battery-swapping infrastructure
and fast-charging EV stations in urban and rural areas.
Shipbuilding and
Maintenance, Repair, and Overhaul (MRO) Sector
- A 10-year exemption on goods used
in shipbuilding and ship-breaking to make India a competitive MRO hub.
- Tax benefits for ports, logistics, and
warehousing sectors to enhance global trade efficiency.
Agriculture and MSME
Export Boost
- ₹5,000 crore export credit scheme for small
and medium enterprises (SMEs) producing agricultural goods and
textiles.
- Expansion of One District One Product
(ODOP) initiative to encourage regional goods for international
markets.
- Faster customs clearances with the introduction
of AI-driven time-bound assessment mechanisms.
These measures are expected
to enhance India’s export potential, reduce import dependency, and
support small businesses in accessing global markets.
Social Welfare and
Inclusion: A Budget for the People
The budget emphasizes inclusive
growth by allocating funds for women, youth, and economically
weaker sections to promote social equity.
7.1 Women Empowerment
Initiatives
- Mahila Samman Savings Certificate extended until
2027 with an 8.2% interest rate.
- ₹1.5 lakh crore allocated for women-led
self-help groups (SHGs) to boost rural entrepreneurship.
- Increased maternity benefits under Pradhan
Mantri Matru Vandana Yojana (PMMVY).
Education and Skill
Development
- ₹1.9 lakh crore allocated for education,
with ₹75,000 crore dedicated to vocational training and digital
education programs.
- Expansion of Skill India Mission with
free AI, data science, and robotics training for 5 million youth.
- 500 new Atal Tinkering Labs in
government schools to encourage innovation.
Healthcare and
Affordable Medicine
- ₹2.3 lakh crore for healthcare, including:
- Expansion of Ayushman Bharat scheme to
cover outpatient treatment.
- 50 new AIIMS-level medical institutions.
- Universal free vaccination for children under
Mission Indradhanush 2.0.
7.4 Affordable Housing and
Rural Development
- PM Awas Yojana extended until 2030,
with 3 crore new houses for the urban poor.
- ₹1.2 lakh crore for rural development
programs, including clean drinking water and sanitation projects.
These initiatives ensure holistic
economic growth, support marginalized communities, and uplift millions through
better education, healthcare, and financial inclusion.
Economic Growth and
Fiscal Management: Balancing Development and Stability
The budget aims to sustain economic
growth while managing fiscal discipline.
Economic Growth
Projections
- The RBI forecasts a GDP growth rate of 6.7%
for 2025-26, driven by domestic consumption and infrastructure
investments.
- Inflation is projected to ease to 4.2%,
supported by supply-side interventions.
- The government aims to increase foreign
direct investment (FDI) inflows by liberalizing trade policies
and reducing regulatory barriers.
Fiscal Deficit and
Revenue Generation
- Fiscal deficit targeted at 4.4% of GDP, a
reduction from the previous year’s 5.2%.
- Revenue mobilization through:
- Disinvestment in public sector enterprises to
generate ₹2.1 lakh crore.
- Expansion of taxpayer base through digital
tracking and enhanced GST compliance.
- ₹3.5 lakh crore allocated for interest payments
on existing debt, ensuring financial stability.
The government aims to balance
economic expansion with responsible spending to maintain investor
confidence and fiscal health.
Industry and Market
Reactions: Mixed Responses from Stakeholders
Positive Industry
Reactions
- Stock markets responded positively, with
the BSE Sensex gaining 800 points post-budget
announcement.
- The infrastructure, EV, and digital economy
sectors welcomed the budget, citing increased funding and policy
support.
- Startups and MSMEs appreciated the
extended tax benefits and credit access.
Concerns from Experts
- Concerns over fiscal discipline, as
increased welfare spending may widen the fiscal deficit.
- Lack of substantial reforms in labor
laws and land acquisition, which are crucial for sustained industrial
growth.
- Agriculture sector critics argue that
the budget lacks strong measures to address farmer protests and minimum
support price (MSP) demands.
While the budget prioritizes
growth, questions remain on its long-term sustainability and ability to
meet economic challenges.
Broader Implications and
Conclusion
Impact on Common
Citizens
- Middle-class families benefit from tax relief,
increasing disposable income.
- Farmers receive financial aid and technology
support, improving agricultural productivity.
- Women and youth gain enhanced employment
opportunities and business incentives.
India's Position in the
Global Economy
- Stronger FDI inflows and manufacturing growth will
improve India’s "Ease of Doing Business" ranking.
- Expanded trade policies will
boost exports, making India a global supply chain
player.
- The government’s focus on green energy and
digital economy aligns with global trends in sustainability and
innovation.
Final Thoughts
The Union Budget 2025-26
is ambitious and strategically designed to balance growth, fiscal stability,
and welfare. It aims to stimulate investment, strengthen
infrastructure, and uplift vulnerable communities.
However, its success will depend
on effective implementation, policy continuity, and external economic
factors. The coming years will determine whether this budget truly ushers
in a new era of economic prosperity for India.
FAQs
1. How does the new tax regime
impact salaried individuals?
The new regime exempts
incomes up to ₹12 lakh from taxes, increasing disposable income for
middle-class earners.
2. What are the key benefits
for startups in this budget?
Startups receive tax
holidays until 2026, easier credit access, and reduced compliance penalties,
promoting entrepreneurship.
3. How does the budget support
the agriculture sector?
Through initiatives like
the Prime Minister Dhan-Dhaanya Krishi Yojana, Pulses Self-Reliance
Mission, and interest-free loans for farmers.
4. Will the budget help
control inflation?
Yes, with supply-side
interventions, infrastructure growth, and tax relief measures, inflation is
expected to stabilize around 4.2%.
5. What sectors gained the
most from Budget 2025-26?
Infrastructure, green energy,
digital technology, EV manufacturing, and MSMEs benefited the most from this
year’s budget.
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