On February 1, 2025, India’s Finance Minister Smt. Nirmala Sitharaman presented the Union Budget for the fiscal year 2025-2026. The Budget emphasizes economic growth, employment generation, Micro, Small and Medium Enterprises (MSME) development, and inclusive progress towards ‘Developed India’.
India’s real GDP grew by 6.4% in FY 2024-25, with Agriculture growing by 3.8%, Industry & Manufacturing growing by 6.2%, Services industry growing by 7.2% and overall exports growing by 6%.
Economic Growth and Fiscal Indicators:
India’s fiscal deficit target for FY 2025-26 is set at 4.4% of GDP, continuing the trend of fiscal consolidation. It is aimed to accelerate economic growth through private sector investments and increased government capital expenditure. The government’s fiscal strategy includes an Asset Monetization Plan worth INR 10 trillion (i.e. approx. USD 115 billion).
Union Budget highlights that Investment, Exports, Agriculture and MSME, are the four engines in the journey to ‘Developed India’. Some of the key highlights and proposals are listed below:
- Investment in people, economy and innovation:
- Setting up a Centre of Excellence in Artificial Intelligence for education with a total outlay of INR 5 billion (i.e. approx. USD 57.4 million).
- Setting up 50,000 Atal Tinkering Labs in government schools over five years.
- Providing Broadband connectivity to all government secondary schools and primary health centres in rural areas.
- A PM Research Fellowship program/scheme to be set up to provide 10,000 fellowships for technological research in IITs and IISc.
- Expanding medical education with an additional 10,000 new seats and 75,000 more seats planned over the next five years.
- Setting up Day Care Cancer Centres in all district hospitals.
- Establishing an Urban Challenge Fund worth INR 1 trillion (i.e. approx. USD 11.5 billion) to support city redevelopment and growth.
- Setting up a Nuclear Energy Mission for R&D of Small Modular Reactors with an outlay of INR 200 billion (i.e. approx. USD 2.3 billion).
- Starting an initiative to boost clean technology to support domestic industries in making solar panels, EV batteries, wind turbines and electrolyzers while working towards producing 100 GW of nuclear energy by 2047.
- Setting up a Maritime Development Fund with INR 250 billion (i.e. approx. USD 2.87 billion) for long-term financing.
- Allocating INR 200 billion (i.e. approx. USD 2.3 billion) for private sector driven R&D and innovation initiatives.
- Allocating INR 1.5 trillion (i.e. approx. USD 17 billion) for 50-year interest-free loans to states for capital expenditure.
- Export Promotion:
- Export Promotion Mission: A structured initiative with sector-wise and ministerial targets to boost exports by improving access to export credit, facilitating cross-border factoring, and assisting MSMEs in overcoming non-tariff barriers in foreign markets.
- Bharat Trade Net (BTN): A new digital public infrastructure for international trade, providing a unified platform for trade documentation, financing solutions, and smoother integration with global supply chains.
- National Framework for GCCs: A strategic framework to help states develop Global Capability Centres (GCCs) in emerging Tier-2 cities, enhancing India’s role in global service delivery.
- Air Cargo Warehousing: Infrastructure upgrades and improved warehousing facilities for air cargo, particularly for high-value and perishable horticulture exports, ensuring better logistics and global competitiveness.
- Agriculture:
- National Mission to be set up on High Yielding Seeds to enhance productivity and climate resilience.
- New scheme to be introduced develop 100 agricultural districts, benefiting 17 million farmers.
- Enhanced Credit through Kisan Credit Card (KCC) for 77 million farmers with a loan limit of INR 500,000 (approx. USD 5,750).
- A six-year mission for pulses to be set up focusing on climate resilience, higher protein content and post-harvest storage.
- A Makhana Board to be set up in the State of Bihar to improve production, processing and marketing of Makhanas (Fox nuts).
- Supporting MSMEs:
- Revised classification criteria for MSMEs, increasing turnover and investment limits.
- Credit Cards for Micro Enterprises with an INR 500,000 (approx. USD 5,750) limit for those registered on the Udyam portal.
- A new scheme to be introduced providing loans up to INR 20 million (approx. USD 230,000) for 500,000 first-time entrepreneurs.
- The credit guarantee cover to be increased from INR 50 million (approx. USD 575,000) to INR 100 million (approx. USD 1.15 million) for Micro and Small Enterprises and from INR 100 million (approx. USD 1.15 million) to INR 200 million (approx. USD 2.3 million) for start-ups.
- A Focus Product Scheme to be set up for employment generation in the footwear, leather and toy industries.
Certain other key highlights in the Budget include:
- Foreign Direct Investment limit for the insurance sector to be raised from 74% to 100%.
- Rationalisation of requirements and procedures for speedy approval of company mergers.
- National Bank for Financing Infrastructure and Development to set up a ‘Partial Credit Enhancement Facility’ for corporate bonds for infrastructure.
- Basic Customs Duty exemption on – inputs for Shipbuilding & Ship Breaking extended for 10 years, open cell for LED/LCD TV, looms for textiles, capital goods for manufacture of lithium ion batteries of mobile phones and EVs.
- Personal income-tax rebate has been significantly increased for income up to INR 1.2 million (approx. USD 13,783) from the current threshold of INR 0.7 million (approx. USD 8,040).
- TDS limit for senior citizens doubled from INR 50,000 (approx. USD 575) to INR 100,000 (approx. USD 1150). Annual limit of INR 240,000 (i.e. approx. USD 2,756) for TDS on rent increased to INR 600,000 (i.e. approx. USD 6,900).
- Improved access to lifesaving medicines.
- Gig workers to get identity cards, registration on e-shram portal and healthcare under PM Jan Arogya Scheme.
- Proposal to decriminalise more than 100 provisions in various laws.
The Ministry of Finance, Government of India’s press release on the “Highlights of the Union Budget 2025-26” may be accessed at: https://www.indiabudget.gov.in/doc/bh1.pdf
‘Summary Of Union Budget 2025-26’ may be accessed at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2098352