India's Finance Minister Nirmala Sitharaman presented the Union Budget for the fiscal year 2025-26, which she labeled as instrumental for economic growth, social welfare, and technological advancement. The budget places significant emphasis on agriculture, infrastructure, tax relief, and encouraging digital transformations, with additional spotlight on defense modernisation and cybersecurity efforts.
This year’s budget outlines several noteworthy measures for the agricultural sector, including the Prime Minister Dhan-Dhaanya Krishi Yojana covering 100 districts to improve productivity and increase access to credit for farmers, which raises the Kisan Credit Card (KCC) loan limit from 3 lakh to 5 lakh rupees. Sitharaman also introduced the Mission for Aatmanirbharta focused on pulses, alongside efforts to boost the cotton yield through advanced technologies. Such initiatives aim to empower approximately 17 million farmers.
Within healthcare, 10,000 new undergraduate and postgraduate medical seats are planned, alongside 200 day-care cancer centers established across districts, fostering access to necessary medical services. The expansion also includes the establishment of broadband for primary health centers under the BharatNet initiative.
Education sees progressive changes with the introduction of 50,000 Atal Tinkering Labs across government schools, aimed at enhancing science, technology, engineering, and mathematics (STEM) education. Connectivity improvement measures include ensuring all secondary schools are connected under BharatNet and the Bharatiya Bhasha Pustak Scheme for digital books catering to various Indian languages.
Tax reforms particularly benefit the middle class, with the government raising the income threshold for personal tax to 1.28 million rupees (approximately 14,800 USD) from the previous 700,000 rupees. Tax rates are also reduced across various income brackets, intended to leave more money with citizens and hence boost household consumption and savings. Analysts have noted this could significantly spur demand among consumers stressed by inflation and stagnant wage growth.
Aasif Malbari, CFO of Godrej Consumer Products, stated, "Tax reforms benefiting the middle class will increase disposable income, fuelling demand across both necessary and aspirational categories." Following the announcement, shares of consumer goods and automobile firms rose considerably, reflecting market optimism about increased consumer spending.
The budget also aligns with broader initiatives to modernize India’s manufacturing sector, emphasizing the National Manufacturing Mission which encourages small and medium enterprises through enhanced credit limits and support for startups through dedicated funds of 10,000 crore rupees.
Finance Minister Sitharaman stressed the significance of the gig economy, announcing plans to register gig workers formally and improve their access to healthcare and welfare initiatives. The initiative indicates the government's intent to adapt to changing labor markets, projected to employ more than 23 million people by 2030 according to NITI Aayog, India’s government think tank.
On the energy front, the Nuclear Energy Mission was highlighted, aiming to develop at least 100GW of nuclear energy by 2047, which is pivotal for India's transition to clean and sustainable energy sources. The focus on integrating renewable energy aims at not only sustainable production but also at stimulating job creation across sectors.
Despite optimistic projections, challenges loom as India is anticipated to post its slowest growth rate in four years due to persistent food inflation and low urban demand. The government's revenue from the budget is projected to face significant losses, as the new tax cuts alone could result in approximately 1 trillion rupees less entering public coffers. The government has budgeted for major infrastructure investments, which may help mitigate these revenue losses.
Several stakeholders have voiced concerns over the potential impacts on government spending, stressing the need for balanced growth across sectors. The Chief Economic Advisor's recent report suggests growth could be between 6.3% to 6.8% for the next fiscal year, necessitating sustained investment and consumer confidence.
The manufacturing sector is acknowledged as being under pressure, making the proposed reforms imperative for revitalizing growth. Sitharaman pointed out the fiscal deficit target of 4.4% of GDP corresponding to the government’s plans for significant developmental investments, including 11.2 trillion rupees earmarked for capital expenditures.
To conclude, the 2025-26 budget presents transformational initiatives aimed at invigorated economic growth, social welfare, and enhanced technological framework. Its success largely depends on the effective and timely implementation of projected reforms and infrastructure funding, which will play a fundamental role for both the middle class and the overall economy.