In a highly anticipated presentation, Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman unveiled the Union Budget for 2025-26, focusing on transformative measures to drive India’s economic growth and competitiveness. The Budget, which emphasized inclusivity and development, sets the stage for India’s journey towards becoming a “Viksit Bharat” (Developed India) by prioritizing sectors such as agriculture, MSMEs, investment, and exports.
Key Highlights and Economic Priorities
In her speech, Finance Minister Sitharaman emphasized that the Union Budget for 2025-26 aimed to stimulate the Indian economy with a focus on the middle class, youth, farmers, and women. With the theme “Sabka Vikas,” the Budget outlines comprehensive strategies to foster balanced growth across all regions, leading to economic resilience and development.
The Budget acknowledges that four primary engines—Agriculture, MSMEs, Investment, and Exports—will propel India’s growth. These engines will be further fueled by ongoing reforms to strengthen the country’s financial ecosystem.
1st Engine: Agriculture
Recognizing the crucial role of agriculture in India’s economy, the Budget introduced several initiatives to enhance productivity and ensure food security. A landmark initiative, the Prime Minister Dhan-Dhaanya Krishi Yojana, will be implemented in collaboration with state governments to cover 100 low-productivity agricultural districts. This scheme aims to promote crop diversification, improve irrigation systems, and bolster credit access.
In addition, the government announced a Mission for Aatmanirbharta in Pulses, targeting specific pulses like Tur, Urad, and Masoor, to reduce dependence on imports and ensure self-sufficiency. Financial support through Kisan Credit Cards (KCC) has also been increased, with loan limits rising from ₹3 lakh to ₹5 lakh under the modified interest subvention scheme. These measures are aimed at uplifting rural livelihoods and ensuring equitable development across farming communities.
2nd Engine: MSMEs
Micro, Small, and Medium Enterprises (MSMEs) are vital to India’s economic fabric, contributing 45% of the country’s exports. To strengthen the MSME sector, the Budget proposes significant enhancements, including increased credit availability with a higher guarantee cover, rising from ₹5 crore to ₹10 crore. The government also plans to support 5 lakh women and marginalized entrepreneurs from Scheduled Castes and Scheduled Tribes, offering term loans of up to ₹2 crore over the next five years.
Further, the government is making strides to establish India as a global hub for toy manufacturing under the Make in India initiative. This will be supported by a National Manufacturing Mission that aims to include small, medium, and large industries, contributing to India’s self-reliance.
3rd Engine: Investment in Innovation and Infrastructure
Investment in people, economy, and innovation has been earmarked as a critical engine for driving growth. The Budget proposes the establishment of 50,000 Atal Tinkering Labs in government schools over the next five years, designed to foster creativity and innovation among young students. Furthermore, the government aims to improve digital infrastructure, including expanding broadband connectivity to secondary schools and rural healthcare centers under the Bharatnet project.
A new Centre of Excellence in Artificial Intelligence (AI) will be established with a ₹500 crore outlay, aimed at harnessing AI for educational advancements and research. The government also plans to introduce an Urban Challenge Fund worth ₹1 lakh crore to transform cities into growth hubs, improving infrastructure, sanitation, and water supply.
In terms of investment in innovation, the Budget provides ₹20,000 crore for private sector-driven Research, Development, and Innovation initiatives, alongside a National Geospatial Mission to develop foundational infrastructure and data.
Must Read….DeepSeek: The Open-Source AI Disruptor Changing the LLM Game
4th Engine: Exports
The export sector has been identified as a significant driver of India’s economic growth. The Budget proposes the creation of a BharatTradeNet platform to streamline trade documentation and financing solutions, facilitating smoother international trade for MSMEs. The government also aims to support domestic manufacturing capacities, particularly in the electronics sector, to integrate with global supply chains.
For the export of perishables and value-added products, the Budget also focuses on enhancing infrastructure for air cargo, including improved warehousing and logistics support. Additionally, the Budget seeks to promote the export of handicrafts and supports Wet Blue leather for value addition, along with significant reductions in tariffs on fish-related exports.
Tax Reforms: A Boost for the Middle Class
A key feature of the Union Budget 2025-26 is a major overhaul of the income tax regime. The government has introduced new tax slabs under the new tax regime, designed to reduce the tax burden on salaried individuals, especially benefiting the middle class. For individuals with a total annual income up to ₹12 lakh (₹1 lakh per month), there will be no tax payable, a move aimed at boosting consumption, savings, and investment among middle-income households.
The Budget proposes a revised tax rate structure:
- ₹0 – ₹4 Lakh: NIL tax
- ₹4 Lakh – ₹8 Lakh: 5% tax
- ₹8 Lakh – ₹12 Lakh: 10% tax
- ₹12 Lakh – ₹16 Lakh: 15% tax
- ₹16 Lakh – ₹20 Lakh: 20% tax
- ₹20 Lakh – ₹24 Lakh: 25% tax
- Above ₹24 Lakh: 30% tax
Further, tax deductions for senior citizens have been doubled, and the threshold for TDS on rent has been raised from ₹2.4 lakh to ₹6 lakh. The Budget also introduces the decriminalization of delay in TDS and TCS payments, alongside an extension of the time limit for filing updated income tax returns from two years to four years.
Fiscal Consolidation and Economic Growth
The Finance Minister reaffirmed the government’s commitment to fiscal consolidation, targeting a reduction in fiscal deficit from 4.8% of GDP in FY 2024-25 to 4.4% in FY 2025-26. The total receipts and expenditure for FY 2025-26 are estimated at ₹34.96 lakh crore and ₹50.65 lakh crore, respectively, with a focus on capital expenditure to enhance infrastructure and social welfare.
To support infrastructure development, a 3-year pipeline of projects in public-private partnership (PPP) mode will be rolled out, and the government has proposed ₹1.5 lakh crore in interest-free loans to states for capital expenditure. The Budget also continues the focus on the Jal Jeevan Mission, aiming to ensure piped water access to rural households by 2028.
Sectoral Reforms and Economic Governance
The Budget also introduces reforms across various sectors to foster a robust regulatory environment, including:
- The establishment of a High-Level Committee for Regulatory Reforms to review non-financial sector regulations.
- Launching an Investment Friendliness Index for states, promoting competition and cooperative federalism.
- A focus on ease of doing business through light-touch regulation, simplifying inspections and compliance.
Additionally, the government has proposed the Jan Vishwas Bill 2.0 to decriminalize over 100 provisions in existing laws, a move aimed at improving the business environment and reducing the compliance burden on taxpayers.
Conclusion
The Union Budget 2025-26 marks a significant step towards a more inclusive, growth-oriented India, focusing on empowering the middle class, rural economy, MSMEs, and fostering innovation. With a strong focus on tax reforms, agricultural support, infrastructure development, and export promotion, the Budget aims to lay a solid foundation for India’s economic future while addressing the aspirations of a diverse population.