The Union Budget 2025-26, unveiled by finance minister Nirmala Sitharaman, adeptly navigates the imperative of addressing immediate economic priorities while charting a path towards India’s long-term aspiration of becoming a developed nation by 2047. Staying firm on its commitment to fiscal discipline, the Budget tackles the temporary slowdown in consumption while also bolstering investments and advancing structural reforms.
One of the Budget’s standout features is its strong push to revive consumption demand. Several measures were introduced to stimulate demand and boost purchasing power. The income- tax relaxation under the new regime provides direct relief to taxpayers, thereby boosting disposable income and spurring discretionary spending. Further, targeted interventions such as the launch of the PM Dhan-Dhaanya Krishi Yojana, the six-year “Mission for Atma Nirbharta in Pulses”, and the initiative on high-yielding seeds aim to enhance agricultural productivity and address supply-side constraints. By stabilising food prices and mitigating inflation volatility, these measures will create a conducive environment for sustained consumption growth. The introduction of a new scheme for the socio-economic uplift of urban workers, with enhanced loan via the PM SVANidhi scheme, is expected to strengthen urban incomes and demand by improving access to credit.
Recognising agriculture as the “sector of the future”, the Budget lays out a forward-looking roadmap for rural prosperity. Steps like the multi-sectoral Rural Prosperity and Resilience Programme, the Mission for Atma Nirbharta in Pulses, the comprehensive programme for vegetables and fruits and the National Mission on High-Yielding Seeds directly will help to strengthen agricultural growth and resilience. Also, enhanced credit support through Kisan Credit Cards will ensure that farmers have improved access to financial resources.
The Budget firmly upholds the 3Is — Investment, Innovation, and Inclusion — as the foundation of India’s long-term economic trajectory. On investment, the government has reinforced its commitment to infrastructure expansion, essential for sustaining growth momentum. A key move in this direction is the launch of a three-year pipeline of projects under the Public-Private Partnership mode by each infrastructure-related ministry, alongside the introduction of Asset Monetizsation Plan 2.0 for 2025-30. Other major infrastructure initiatives include the extension of the Jal Jeevan Mission, the creation of an Urban Challenge Fund, the launch of a Nuclear Energy Mission, a modified UDAN scheme to enhance regional air connectivity, the revamp of the shipbuilding financial assistance policy and establishment of a Maritime Development Fund to drive growth in inland waterways and ports. Also, the Budget introduces key regulatory reforms like rationalisation of the tariff structure and correction of duty inversion, aimed at strengthening domestic manufacturing and boosting exports. These measures simplify the tax regime, reduce compliance burdens, and enhance trade facilitation, fostering a more business-friendly environment.
This budget makes a strong commitment towards innovation and R&D. With an allocation of Rs 20,000 crores for research, development and innovation initiative, the government has signalled its intent to position India as a global leader in technological advancements. Initiatives such as the Deep Tech Fund of Funds, aimed at supporting next generation startups, expansion of the PM Research Fellowship scheme for research in IITs and IISCs and establishment of a National Digital Repository of Indian knowledge systems for knowledge-sharing will not only spur technological progress but also create high-value employment opportunities, thereby strengthening India’s position as a global innovation hub.
The Budget continues its emphasis on inclusion, ensuring that growth benefits reach all segments of society. The Saksham Anganwadi and Poshan 2.0 programme reinforces the government’s commitment to child and maternal nutrition, and social security scheme for gig workers will provide safety net to workers in new-age services economy. For MSMEs and startups, the government has introduced tailored measures, including enhanced credit cover and customised credit cards for micro enterprises registered on the Udyam portal, export promotion initiatives to help MSMEs tackle non-tariff barriers, and a Rs 10,000 crore Fund of Funds for Startups for catalysing entrepreneurial growth.
To attract greater investment, the government has increased the foreign direct investment (FDI) limit in the insurance sector from 74 per cent to 100 per cent. This is a welcome move for the industry which is expected to fuel growth by unlocking fresh capital. A robust regulatory framework will be crucial to facilitate this capital inflow and drive innovation in the sector.
Furthermore, investments in education and skilling, such as the establishment of National Centres of Excellence, expanded medical education infrastructure, and AI-driven skill development programmes, will ensure that India’s workforce remains globally competitive amidst rapid transformations in technology.
Recognising that India’s development journey must be a collaborative effort, several initiatives have been designed for collaborative execution with state governments, including the comprehensive multisectoral Rural Prosperity and Resilience Programme and the vegetables and fruits programme. The Budget also introduces several initiatives to strengthen state-level development. The Rs 1.5 lakh crore allocation for 50-year interest-free loans to states for capital expenditure will augment their infrastructure capacity. The launch of an Investment Friendliness Index in 2025 will push competitive cooperative federalism, encouraging states to enhance their business environment.
While delivering on growth imperatives, the Budget maintains a delicate balance between fiscal discipline and capital expenditure, reaffirming its commitment to macroeconomic stability. The effective capital expenditure for 2025-26 has been budgeted to rise by 17.4% over the 2024-25 (revised estimate), reaching Rs 15.5 lakh crores, underscoring the government’s strong focus on infrastructure and development. At the same time, the fiscal deficit is projected to decline to 4.8% of GDP in 2024-25 and is set to decline to 4.4% for 2025-26. This prudence will be instrumental in navigating uncertainties posed by global economic volatility and geopolitical shifts by ensuring macroeconomic stability.
As the country progresses towards its vision of becoming a developed economy by 2047, this Budget emerges as a transformative blueprint — one that not only fuels immediate economic momentum but also charts the course for long-term resilience and prosperity.
This article was written by Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry. It was first published on 2nd February 2025 in THE ASIAN AGE