On February 1, 2025, Finance Minister Nirmala Sitharaman unveiled the Union Budget for the fiscal year 2025-26, outlining key initiatives aimed at stimulating economic growth and benefiting the middle class. The budget, which marks Sitharaman's eighth consecutive presentation, has been met with both acclaim and criticism from various sectors of Indian industry.
According to industry leaders, this budget provides "a strong and convincing template for boosting growth and generating jobs, the twin imperatives for our economy today," noted Sanjiv Puri, the President of the Confederation of Indian Industry (CII). He emphasized the need for targeted interventions to facilitate inclusive development.
The Economic Survey presented alongside the budget projected India’s growth at 6.3-6.8% for the coming fiscal year, raising expectations for measures to drive demand and investment. "This budget encompasses a heavy dose of reforms, fiscal stimulus, and a clear focus on the farm sector, MSMEs, youth, and women," said Harsha Vardhan Agarwal, President of the Federation of Indian Chambers of Commerce & Industry (FICCI).
One of the budget's hallmark features is the revision of tax slabs aimed at middle-class taxpayers. The new structure provides significant relief, making incomes up to Rs 12 lakh per annum tax-free. Notably, Anil Agarwal, Chairman of Vedanta Ltd, remarked, "The Budget has hit the perfect note, providing great relief to the middle class." Salaried individuals will see exemption limits raised to Rs 12.75 lakh when standard deductions are included, translating to savings of up to Rs 1,10,000 for earners at the Rs 25 lakh threshold.
Further bolstering the economy, Sitharaman announced the establishment of comprehensive credit guarantees for Micro, Small, and Medium Enterprises (MSMEs). The credit guarantee cover was increased from Rs 5 crore to Rs 10 crore for small enterprises, making available approximately Rs 1.5 lakh crore more over five years.
Key to the budget’s architecture is the emphasis on infrastructure development and public-private partnerships (PPPs). Each infrastructure ministry is tasked with developing three-year project pipelines to stimulate private investment. This approach has been welcomed as necessary for transforming India’s infrastructure capabilities.
On the educational front, the government plans to increase enrollments and is establishing Centers of Excellence focused on areas like Artificial Intelligence (AI), reaffirming its commitment to enhancing skills and innovation. Anish Shah, CEO of Mahindra Group, praised the budget for its continued support of consumption growth through tax reforms, which he believes will place more disposable income in the hands of consumers and stimulate private sector capital expenditure.
Despite these advancements, the budget faced scrutiny, especially concerning allocations for sectors like railways and healthcare. Railways received Rs 2.55 lakh crore, marginally lower than last year, prompting concerns over the pace of modernization and expansion. Critics voiced disappointment over the declining share of GDP investment in healthcare, which remains at just 3.3%—significantly lower than China's 5.4% and the US's 16%.
ADDRESSING the perceived gaps, industry leaders expressed the need for more substantial tax incentives and reforms to encourage business competition, especially for larger corporations. JSW Group Chairman Sajjan Jindal indicated, "While capex spending is at a strong level, we anticipated more based on historical trends," reflecting general sentiments among corporate leaders.
The responses from global players have also been broadly positive. Richard McCallum, CEO of the UK India Business Council, articulated his support for reforms simplifying foreign direct investment (FDI) conditions, highlighting their potential to attract international investments needed for sustainable growth. "We need more private investment for growth to be sustainable," he affirmed.
Overall, as discussions around the budget continue, its potential to positively impact various economic sectors remains high, albeit with polarized perspectives on its sufficiency and execution. The road to achieving ‘Viksit Bharat’ (developed India) by 2047 requires consistent and quality expenditure and reforms addressing Britain's current fiscal health.
For consumers and small businesses, the budget appears to prioritize immediate economic relief, especially for the middle class. Still, as fiscal realities continue to evolve, so will the demands for broader structural reforms and investments across India.