
Finance minister Nirmala Sitharaman has presented a strong Union budget for 2025-26. It comes at a time of high uncertainty linked to global events, slowing domestic demand and a challenging fiscal outlook. Not only does it recognize the challenges, but also lays a roadmap for strong, inclusive and sustainable economic growth needed to become a developed economy.
A strategic focus on four key drivers— agriculture, micro, small and medium enterprises (MSMEs), investment and exports—rightly identifies the policies that will best boost growth, and significant measures have been unveiled to ensure that these are accelerated effectively. Further, there has been a strong emphasis on knowledge, innovation and meeting requirements of the future. Above all, it is a budget for citizens at large.
Its focus on reviving consumer demand and boosting economic activity is commendable. The slew of tax measures, including no income tax on annual income of up to ₹12 lakh, should drive spending. Further, the rural economy will get a boost through measures like the Prime Minister Dhan Dhanya Krishi Yojana. These steps have high potential to kick-start a virtuous cycle of consumption and investment.
This has been accompanied by a continued thrust on capital expenditure, which has been budgeted at ₹11.2 trillion for 2025-26, a rise of 10.9% from the revised print of ₹10.1 trillion in 2024-25. This is expected to have a multiplier effect on growth next year and help crowd in private investment. The budget has simultaneously reiterated the Centre’s push for cooperative federalism by continuing with its ₹1.5 trillion interest-free-loans scheme for state capex for next year as well.
While introducing tax cuts and enhancing public capital expenditure, the budget appropriately recognizes maintaining fiscal prudence as a fundamental requirement for achieving sustainable growth. The Centre has revised its fiscal-deficit estimate down from 4.9%-of-GDPthat it had set for 2024-25 to 4.8%. Further, it abides by its earlier-set glide path and aims for a deficit of 4.4% in 2025-26. Ahigher budgeted tax-to-GDPratio of 12% for 2025-26 through increased tax compliance and a broadened tax base will help on this path of fiscal stability.
The budget’s triumvirate of support for consumption through tax cuts, an increase in capex for infrastructure and a fiscal deficit reduction will lay India’s path for sustainable economic growth.
The budget of this year continues the momentum of previous ones in pushing India towards becoming a global manufacturing hub. This is expected to be achieved through a mix of measures that promote manufacturing, enhance the ease of doing business and provide relief on imports of key raw materials. The National Manufacturing Mission will energize India’s manufacturing sector and create global champions. For the ease of doing business, more than 100 provisions in various laws will be decriminalized through the Jan Vishwas Bill 2.0, which CII had been taking up with the government. Importantly, in the spirit of competitive federalism, the Investment Friendliness Index of States should help ease regulatory cholesterol at the state level and enhance the competitiveness of Indian manufacturing.
One of most heartening aspects of the budget has been its focus on employment generation. Its support to various labour-intensive industries like footwear and leather, toys, tourism and gig work will generate jobs and help capitalize on India’s demographic dividend. Further, MSMEs, whose growth is essential to achieve the ‘Atmanirbhar Bharat’ goal and create large-scale employment opportunities, have received the desired support through the enhancement of credit guarantee cover, introduction of customized credit cards and support for their tech upgradation.
This has been effectively complemented by measures like the creation of five National Centres of Excellence for Skilling to equip India’s youth with the necessary skills for global opportunities. These measures will build domestic capabilities, especially at a time of geopolitical and geo-economic flux, helping the country turn its challenges into opportunities.
Staying within the global context, another significant part of the budget has been its promotion of exports. The Export Promotion Mission, through inter-ministerial coordination, will position exports as a key driver of economic growth. Additionally, a national guidance framework will be developed to help states promote Global Capability Centres (GCCs) and boost services exports.
With an emphasis on increasing efficiency, the budget unveiled several financial-sector reforms. Further, the announced hike in India’s foreign direct investment (FDI) limit in insurance through the automatic route from 74% to 100% will increase insurance penetration in rural areas, thus promoting inclusive economic growth.
To build an India of the future, the budget announced a Deep-tech Fund of Funds. This will support technological advancements and a Centre of Excellence in Artificial Intelligence (AI) for education in this field. Further, we are happy that the government in partnership with industry plans to develop at least 100 gigawatts of nuclear energy by 2047 to meet India’s growing energy demands in an environmentally sustainable manner.
The budget, coming at a time of heightened global uncertainty, especially over trade with tariffs rising, rightly focuses on providing the Indian economy with a growth impetus that is inclusive and sustainable. While addressing immediate concerns, the government has not lost sight of the medium- to long-term vision for India, of becoming a Viksit Rashtra by 2047. Many of the measures are in line with CII submissions during the stakeholder consultation process and we compliment the government for a strategic and visionary budget that is rightly being praised in all quarters.
This article was written by Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry. It was first published on 3rd February 2025 in mint