The Union Budget 2025-26 or the Annual Financial Statement as per Article 112 of the Indian Constitution is not merely an economic statement; it is, in essence, a legal instrument that embodies the financial policies of the State within the constitutional framework. The First Budget in the Second Quarter of the 21st Century which has identified four engines of growth viz. Agriculture, MSMEs, Investments, and Exports, reflects India’s priorities, growth, attempts to be fiscally prudent, social justice aspirations, and economic strategy, encapsulated within the principles enshrined in the Constitution of India.
On the front of agriculture and allied activities, the budget aims to expand PM Dhan-Dhaanya Krishi Yojana to cover 150 agri-districts, to ensure sustainable farming practices and increased productivity. It also aims to expand rural digital accessibility by efficiently using Post service with banking services, facilitating credit access in rural India. There is a concerted push to enhance sea food exports by sustainably harnessing fisheries in Exclusive economic Zones and high Seas.
National Institute of Food Technology, Entrepreneurship and Management is also proposed to be set up in Bihar to boost food processing activities in the entire eastern region. These measures will reduce wastage/spoilage along the agriculture value chain, lead to crop diversification, enhance farmer’s incomes while at the same time conserving the environment.
MSME sector – which is the largest non agricultural employment generator besides being a significant contributor to export was another focus area of Budget 2025-26. The current investment threshold would be raised 2.5 times and the turnover limit would be enhanced twice, thereby encouraging MSMEs to grow without any fear of losing the benefits. In a bid to improve access of MSMEs to credit, the budget proposes a new, customised credit card with a Rs 5 lakh limit.
Targeted schemes have been proposed for the footwear & leather sector besides the toy sector to tap their potential for employment and export.
Budget 2025 continues the government’s focus on fostering Indian startups, through steps like the establishment of a new Fund of Funds with an expanded scope and a fresh contribution of ₹10,000 crore, resolution of ongoing tax uncertainties for Category I and II Alternative Investment Funds (AIFs) by clarifying that income from the transfer of shares and securities will be treated as capital gains rather than business income. These measures collectively aim to strengthen India’s startup landscape, fostering innovation and economic growth.
Infrastructure has been given its due under SWAMIH, UDAN, Maritime Modernization Fund. However, to compensate for the falling capex under the constraint of skyrocketing revenue expenditure, the budget has nudged all Infrastructure Ministries and even the states to shift to the public private partnership (PPP) model. However, without addressing the elephant in the room which have hitherto plagued PPP projects, such push might not be able to achieve its avowed objective.
Expansion of Ayushman Bharat Scheme, extending coverage to over 60 crore citizens, Establishment of District Cancer Care Centres with advanced treatment facilities, Vaccination & Public Health Mission with ₹10,000 crore allocated for pandemic preparedness exhibit the seriousness of the government towards reducing out of the pocket expenditure of the citizens and ensuring they are provided with quality healthcare. Jal Jeevan Mission has now further been extended till 2028, focusing on ensuring 100% rural tap-water connectivity.
50,000 Atal Tinkering Labs in government schools for STEM education, establishment of five National Centres of Excellence for AI and robotics, expansion of IITs and medical education institutes with 10,000 new seats could prove to be the much needed stimulus to bridge the gap between education and employability and thereby help tap the demographic dividend.
Balancing the need for sustainable energy for industrial development and economic growth, Green Hydrogen Mission, FAME-III scheme, solar and wind power have remained thrust areas. Exemptions on import of critical minerals like cobalt, basic customs duty exemptions for Lithium-Ion battery needed for manufacturing mobile phones as well as EVs seek to augment the status of India in the critical minerals landscape.
Besides focusing on advanced indigenous weaponry, strategic road and railway networks, additional warships and the deployment of enhanced coastal radar systems, the Budget 2025 focuses on establishment of a Cybersecurity & AI Defence Hub, aimed at integrating artificial intelligence-driven military advancements. However, lack of unambiguous legal outlook on fixing liability and accountability could derail private investment.
The budget introduces BharatTradeNet – A unified platform for seamless trade documentation and export financing solutions. The Export Promotion Mission focusing on urgency to provide for Special support for MSMEs to integrate into global value chains. Further focus on manufacturing, PLI (Production Linked Incentive) 2.0 was revamped for electronics, textiles, and automobiles and Customs duty exemptions were provided for export-focused industries.
On the direct tax front, the Union Budget 2025 has continued incentivising the new Income Tax regime by offering a 100% rebate under the new regime for individuals earning below Rs. 12 lakh per annum. This will increase disposable income in the hands of individuals and thereby give a fillip to consumption, which contributes around 60% to the economy’s GDP. Additionally, the taxation framework for Alternative Investment Funds (AIFs) has been clarified, ensuring that income from the transfer of shares and securities is classified as capital gains rather than business income, exempting AIFs from tax while passing the liability to investors. Furthermore, the introduction of a mechanism allowing assessees to voluntarily disclose facts and discharge additional duty—without fear of penalties, provided no audits or investigations are initiated—aims to reduce litigation and foster compliance.
Budget 2025 has proposed rationalization of the customs rate structure, reducing tariff slabs and exempting Social Welfare Cess on select imports, thereby simplifying compliance for businesses. Further, the establishment of a three-year time limit for the finalization of provisional assessments and the introduction of voluntary post-import declarations allow importers to rectify short-payments without penalties, reducing litigation risks. These measures collectively reflect a concerted effort to modernize India’s taxation framework, enhance business confidence, and support the nation’s economic trajectory.
Going by the allocation of Rs. 574 crore for Census, Surveys and Statistics/Registrar General of India (RGI), decadal census and NPR updation, pending since 2021, is unlikely even in the current fiscal as the entire exercise would cost over Rs. 12,000/- crore. Delay in collection of such statistics hinders evidence based policy making and valuable inputs by civil society and researchers. Conduct of census anytime after 2026 will open the pandora’s box of delimitation which has been forced shut by 84th Constitutional Amendment Act.
Besides federal challenges, this may even set the stage for confrontation among the NDA coalition partners. However, for a nation as aspirational as India, the Budget leaves much to be done. It is trite that in the global value chain, India has consistently been punching below its weight. The pandemic followed by the US-Sino Trade war has forced countries and companies to look beyond China. The Budget could have been assertive on how to position India as a lucrative alternative to China. The dream of Viksit Bharat by 2047 requires a consistent 8%+ real growth of GDP. The share of manufacturing needs further push to go beyond 17 per cent of the GDP despite Make in India and PLI Schemes. In a deglobalising and protectionist world, exports are feared to further come down.
The focus on exports is welcome, however, India should now expand its sight from its domestic market to international. Increasing the purchasing power of its populace through good quality jobs will kickstart the virtuous cycle of growth and position India as the roaring Asian tiger in the second quarter of the 21st century.
Having said this, it is also true that the Union Budget 2025-26 has sought to recalibrate the economic momentum by firing the engines of growth, reducing compliance burden, maintaining fiscal discipline, and supporting the weaker sections. The successful implementation of the budget will depend upon robust legal execution, adherence to regulatory norms, and judicial oversight where necessary. The government must ensure that policy measures are implemented in a manner consistent with constitutional guarantees, statutory obligations, and principles of administrative fairness, thereby safeguarding the interests of all stakeholders—citizens, businesses, and the State alike.
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