Union Budget 2025-26

The Union Budget is a cornerstone of Indian polity, serving as a crucial financial roadmap for the nation’s economic growth and development. Presented annually by the Finance Minister, it outlines the government’s fiscal strategy, revenue projections, and expenditure plans for the upcoming financial year.

Mandated by Article 112 of the Indian Constitution, the Annual Financial Statement (Union Budget) undergoes meticulous planning, parliamentary scrutiny, and public discourse. It plays a pivotal role in shaping economic policies, allocating resources, and addressing socio-economic challenges.

The Union Budget not only reflects the government’s priorities but also serves as a tool for fiscal discipline, economic stability, and inclusive growth. Understanding its significance is essential for citizens to comprehend the nation’s financial direction and policy objectives.

Budget Estimates 2025-26

The Union Budget 2025-26 outlines a comprehensive roadmap for India’s economic and fiscal management. Key highlights of the Budget Estimates 2005-26  include:

• Total Receipts (excluding borrowings): ₹34.96 lakh crore, emphasizing reliance on tax and non-tax revenues for expenditure.
• Total Expenditure: ₹50.65 lakh crore, with a strong focus on infrastructure, welfare schemes, and development initiatives.
• Net Tax Receipts: ₹28.37 lakh crore, reflecting efforts to enhance tax collection and compliance.
• Fiscal Deficit Target: 4.4% of GDP, balancing fiscal consolidation with growth promotion.
• Gross Market Borrowings: ₹14.82 lakh crore, bridging the revenue-expenditure gap while supporting economic programs.
• Capital Expenditure: ₹11.21 lakh crore (3.1% of GDP), marking the highest-ever allocation to drive infrastructure development and long-term growth.

These figures underscore the government’s dual approach of maintaining fiscal discipline and ensuring robust public investment to stimulate the economy. The focus is on building a resilient economy through targeted spending and efficient resource mobilization.

Agriculture as the First Engine of Development

Agriculture has been identified as a cornerstone for inclusive growth and rural development in the Union Budget 2025-26. Several new programs and policies aim to revolutionize the sector by enhancing productivity, sustainability, and farmer welfare:

1. Prime Minister Dhan-Dhaanya Krishi Yojana

The flagship Prime Minister Dhan-Dhaanya Krishi Yojana aims to significantly enhance agricultural productivity and profitability in 100 low-performing districts across India. Key features include:

• A collaborative partnership with state governments to address localized agricultural challenges.
• Targeted interventions in districts with low productivity, moderate crop intensity, and limited access to agricultural credit.
• The scheme is expected to benefit 1.7 crore farmers, empowering them with resources and support to improve yields and incomes.

2. Building Rural Prosperity and Resilience

The budget proposes a comprehensive multi-sectoral program to address rural underemployment and promote economic development.

• The program focuses on skilling, investment in rural enterprises, and technology adoption to invigorate the rural economy.
• Phase 1 will cover 100 developing agricultural districts, setting the foundation for sustainable rural growth and poverty alleviation.

3. Atma Nirbharta in Pulses

The Aatmanirbharta in Pulses Mission aims to achieve self-sufficiency in pulses production over six years, addressing India’s reliance on imports.

• Focused on key varieties like Tur, Urad, and Masoor, the mission aims to increase productivity and production.
• Institutions like NAFED and NCCF will ensure procurement from farmers over the next four years, offering fair prices and reducing market volatility.

4. Comprehensive Programme for Vegetables & Fruits

A new initiative has been launched to enhance the horticulture sector’s potential:

• It promotes production, efficient supply chain management, and processing of fruits and vegetables.
• The program aims to ensure remunerative prices for farmers, boosting their income and reducing wastage.
• Implementation will be in partnership with state governments to tailor solutions to regional needs.

5. Makhana Board in Bihar

The establishment of a Makhana Board in Bihar is a landmark step to support the cultivation of this niche crop:

• It will focus on improving production techniques, processing facilities, and marketing avenues for makhana (fox nuts).
• The initiative aims to enhance value addition, export potential, and farmer income.

6. National Mission on High Yielding Seeds

A National Mission on High Yielding Seeds has been introduced to strengthen the seed sector:

• The mission will focus on enhancing the research ecosystem for developing high-yield, pest-resistant, and climate-resilient seeds.
• Over 100 new seed varieties are targeted to become commercially available, addressing the need for modern, efficient agricultural inputs.

7. Fisheries Development

A new framework for sustainable exploitation of fisheries resources has been announced:

• The program will prioritize the Indian Exclusive Economic Zone and high seas, ensuring ecological balance and economic benefits.
• Special attention will be given to the Andaman & Nicobar Islands and Lakshadweep, leveraging their untapped potential.

8. Mission for Cotton Productivity

The Mission for Cotton Productivity aims to enhance the sustainability and yield of cotton farming over five years:

• The program will promote the cultivation of extra-long staple cotton varieties to meet domestic and export demand.
• It emphasizes eco-friendly practices and improved farming techniques for better returns.

9. Enhanced Credit through Kisan Credit Card (KCC)

To provide financial empowerment to farmers, the Kisan Credit Card (KCC) scheme has been revamped:

• The loan limit under the Modified Interest Subvention Scheme has been increased from ₹3 lakh to ₹5 lakh.
• This expansion will ensure greater access to affordable credit for farmers, supporting investments in modern farming practices.

10. Urea Plant in Assam

The establishment of a new urea production facility at Namrup, Assam, marks a significant development in India’s fertilizer sector:

• The plant will have an annual production capacity of 12.7 lakh metric tons, addressing regional and national demand for urea.
• It is expected to reduce import dependency and ensure a steady supply of affordable fertilizers for farmers.

These initiatives collectively aim to transform India’s agricultural landscape by addressing productivity gaps, enhancing rural prosperity, and promoting sustainable farming practices. The government’s focus on self-sufficiency, technological advancement, and resource optimization will significantly contribute to ensuring food security and improving farmer livelihoods.

MSMEs as the Second Engine of Development

Revised MSME Classification Criteria

• The government has proposed increasing the investment and turnover limits for the classification of Micro, Small, and Medium Enterprises (MSMEs) by 2.5 times and 2 times, respectively.
• This revision aims to bring more enterprises under the MSME umbrella, thereby encouraging their growth, competitiveness, and integration into the formal economy.

Credit Cards for Micro Enterprises

• A new initiative has been introduced to offer customized credit cards with a credit limit of ₹5 lakh specifically for micro-enterprises registered on the Udyam portal.
• This scheme aims to ease access to credit for small businesses, with a target of issuing 10 lakh credit cards in the first year of implementation, fostering financial inclusion and enabling entrepreneurial growth.

Fund of Funds for Startups

• A new Fund of Funds has been launched with an expanded scope to support emerging startups across sectors.
• The government will contribute ₹10,000 crore to this fund, which will catalyze additional investments and drive the growth of innovative enterprises in India.

Scheme for First-time Entrepreneurs

• A targeted scheme has been introduced to empower 5 lakh first-time entrepreneurs from marginalized communities, including women, Scheduled Castes (SCs), and Scheduled Tribes (STs).
• Under this scheme, term loans of up to ₹2 crore will be provided over the next 5 years to foster inclusive entrepreneurship and reduce economic disparities.

Focus Product Scheme for Footwear & Leather Sectors

• The government has launched a focused scheme to enhance the productivity, quality, and competitiveness of the footwear and leather sectors.
• This initiative is expected to generate employment for 22 lakh individuals, achieve a turnover of ₹4 lakh crore, and boost exports beyond ₹1.1 lakh crore, solidifying India’s position as a global leader in these industries.

Measures for the Toy Sector

• A comprehensive scheme has been unveiled to promote the development of high-quality, innovative, and sustainable toys.
• The goal is to establish India as a global hub for toy manufacturing, leveraging the country’s rich cultural heritage and modern design capabilities.

Support for Food Processing

• A National Institute of Food Technology, Entrepreneurship, and Management will be established in Bihar to support the growth of the food processing sector.
• This initiative aims to enhance value addition, improve food security, and create employment opportunities in the region.

National Manufacturing Mission

• The National Manufacturing Mission will provide a strategic framework to support industries of all sizes, including small, medium, and large enterprises.
• This mission aligns with the “Make in India” initiative, focusing on boosting domestic manufacturing, enhancing exports, and reducing reliance on imports.

Investment as the Third Engine of Development

Investing in People

• Saksham Anganwadi and Poshan 2.0

• Enhanced cost norms have been introduced for nutritional support to strengthen the existing Anganwadi system and improve child health and development outcomes.

• Atal Tinkering Labs

• Aiming to foster innovation and creativity, 50,000 Atal Tinkering Labs will be set up in government schools across the country over the next 5 years.

• Broadband Connectivity

• High-speed broadband connectivity will be provided to all government secondary schools and rural primary health centers under the BharatNet project, bridging the digital divide and improving access to education and healthcare.

• Bharatiya Bhasha Pustak Scheme

• The scheme will create digital Indian language books for schools and higher education institutions, promoting regional languages and enriching the educational experience.

• National Centres of Excellence for Skilling

• Five state-of-the-art centers will be established with global expertise to provide advanced skill training and boost employability.

• Expansion of IIT Capacity

• Infrastructure for 6,500 additional students will be created across five new IITs, enhancing the capacity for cutting-edge education and research.

• AI Centre of Excellence for Education

• A Centre of Excellence for Artificial Intelligence in education will be set up with an outlay of ₹500 crore to promote AI-driven learning solutions.

• Medical Education Expansion

• The government plans to add 10,000 new medical seats in colleges and hospitals next year and 75,000 seats over the next 5 years to address the shortage of healthcare professionals.

• Day Care Cancer Centres

• Specialized Day Care Cancer Centres will be set up in all district hospitals over the next 3 years, with 200 centers targeted for completion by 2025-26.

• Urban Livelihoods Scheme

• A revamped Urban Livelihoods Scheme will be introduced to uplift urban workers by providing them with socio-economic opportunities and skill training.

• PM SVANidhi Revamp

• The PM SVANidhi scheme will offer enhanced bank loans and UPI-linked credit cards with a limit of ₹30,000 to street vendors for financial empowerment.

• Social Security for Online Platform Workers

• Online platform workers will receive identity cards, registration on the e-Shram portal, and healthcare benefits under the PM Jan Arogya Yojana to ensure their welfare.

Investing in the Economy

• Public-Private Partnership in Infrastructure

• A 3-year project pipeline will be developed to facilitate infrastructure projects under the PPP model, ensuring efficient execution and resource utilization.

• Support to States for Infrastructure

• The government will provide ₹1.5 lakh crore in interest-free 50-year loans to states to support infrastructure development and boost economic growth.

• Asset Monetization Plan 2025-30

• A comprehensive asset monetization plan aims to generate ₹10 lakh crore, which will be reinvested into new infrastructure projects.

• Jal Jeevan Mission Extension

• The Jal Jeevan Mission has been extended until 2028 with an enhanced outlay to ensure piped water supply to all households.

• Urban Challenge Fund

• A ₹1 lakh crore fund has been announced to address urban challenges, with ₹10,000 crore allocated for 2025-26.

• Nuclear Energy Mission

• The mission includes a ₹20,000 crore outlay for developing Small Modular Reactors (SMRs), with five indigenous SMRs planned by 2033 to enhance energy security.

• Shipbuilding and Maritime Development

• A revamped Shipbuilding Financial Assistance Policy and a ₹25,000 crore Maritime Development Fund aim to strengthen the maritime industry and boost exports.

• UDAN – Regional Connectivity Scheme

• The scheme targets connecting 120 new destinations and facilitating travel for 4 crore passengers over the next decade to improve regional connectivity.

• Infrastructure Projects

• Key projects include a greenfield airport in Bihar and support for the Western Koshi Canal Project, enhancing regional infrastructure.

• Mining Sector Reforms

• New policies will focus on the recovery of critical minerals from tailings, ensuring sustainable mining practices and resource utilization.

• SWAMIH Fund 2

• A second tranche of ₹15,000 crore will be allocated to complete 1 lakh dwelling units, addressing the housing needs of citizens.

• Tourism Development

• The government will develop the top 50 tourist destinations to boost tourism and create employment opportunities.

Investing in Innovation

• Research, Development, and Innovation

• An allocation of ₹20,000 crore will support private sector-driven research and development, promoting technological advancement and innovation.

• Deep Tech Fund of Funds

• A specialized fund of funds will catalyze the growth of next-generation startups in cutting-edge technologies.

• PM Research Fellowship

• Ten thousand fellowships will be awarded to researchers in IITs and IISc to drive innovation in technology and science.

• Gene Bank for Crops Germplasm

• A second Gene Bank will be established, housing 10 lakh germplasm lines to preserve biodiversity and ensure food security.

• National Geospatial Mission

• The mission will create foundational geospatial infrastructure and data to support various sectors, including urban planning and disaster management.

• Gyan Bharatam Mission

• This mission aims to conserve and document India’s manuscript heritage, preserving the nation’s rich cultural legacy for future generations.

These measures collectively aim to stimulate economic growth, enhance human capital, improve infrastructure, and foster a culture of innovation, positioning India for sustainable development.

Exports as the 4th Engine of Development

Export Promotion Mission

The Export Promotion Mission is a collaborative initiative undertaken by the Ministries of Commerce, MSME, and Finance. It aims to identify, set, and achieve sectoral and ministerial export targets to enhance India’s export competitiveness globally. By leveraging strategic planning, capacity-building measures, and targeted support to various sectors, the mission seeks to position India as a global leader in trade.

BharatTradeNet (BTN)

BharatTradeNet is a unified platform designed to simplify international trade processes. It streamlines trade documentation and financing solutions, creating a seamless and efficient environment for exporters. The platform is expected to significantly reduce transaction costs, enhance transparency, and improve the overall ease of conducting export operations, thereby making Indian exporters more competitive on the global stage.

National Framework for Global Capability Centres (GCC)

The National Framework for Global Capability Centres (GCC) provides guidance for states to promote and attract GCCs in tier-2 cities. This initiative aims to decentralize IT and business process management operations from traditional urban hubs to smaller cities. By doing so, it seeks to create high-skilled job opportunities, foster regional economic development, and enable tier-2 cities to emerge as centers of innovation and excellence.

Reforms as Fuel: Financial Sector Reforms and Development

FDI in Insurance Sector

The Foreign Direct Investment (FDI) limit in the insurance sector has been increased from 74% to 100%. This reform is specifically applicable to companies that reinvest their entire premium collections within India. The move aims to attract higher levels of foreign investment and expertise into the sector, enhancing its operational efficiency, competitiveness, and service delivery.

Credit Enhancement Facility by NaBFID

The National Bank for Financing Infrastructure and Development (NaBFID) will establish a Partial Credit Enhancement Facility focused on corporate bonds for infrastructure projects. This facility aims to improve the credit ratings of such bonds, thereby reducing borrowing costs for infrastructure companies. By facilitating access to affordable capital, this initiative is expected to boost the development of critical infrastructure across the country.

Grameen Credit Score

Public Sector Banks will develop a rural credit scoring framework under the “Grameen Credit Score” initiative. This framework targets Self-Help Group (SHG) members and the rural population to enhance their access to credit. By creating a formal credit profile for rural borrowers, this initiative aims to deepen financial inclusion and empower rural communities economically.

Pension Sector Reforms

A dedicated forum for regulatory coordination in the pension sector will be established to facilitate the development of new and innovative pension products. These reforms aim to increase pension coverage, encourage retirement savings, and ensure financial security for citizens in their post-retirement years.

High-Level Committee for Regulatory Reforms

A high-level committee will undertake a comprehensive review of non-financial sector regulations, including certifications, licenses, and permissions. The objective is to reduce the regulatory burden, eliminate redundancies, and improve the ease of doing business. This reform is expected to attract greater investment and foster a business-friendly environment.

Investment Friendliness Index of States

An Investment Friendliness Index will be launched in 2025 to promote competitive cooperative federalism among states. The index will evaluate states on parameters such as ease of doing business, regulatory efficiency, and investment facilitation. This initiative is likely to encourage states to enhance their business environments and attract higher levels of investment.

Jan Vishwas Bill 2.0

The Jan Vishwas Bill 2.0 builds upon earlier efforts to reduce compliance burdens on businesses. It aims to decriminalize over 100 provisions across various laws, thereby simplifying legal frameworks and reducing complexities. By improving ease of doing business, this reform is expected to encourage entrepreneurship and enhance the overall business climate in the country.

These initiatives collectively aim to strengthen India’s export capabilities, attract foreign investment, streamline regulatory processes, and improve financial sector efficiency. The focus on exports as a key growth engine, along with comprehensive financial and regulatory reforms, is expected to propel India’s economic development and bolster its competitiveness in the global marketplace.

Direct Tax Reforms

Personal Income Tax:

• The new tax regime offers a Rs 12 lakh exemption on income, which is a significant relief for taxpayers.
• For salaried individuals, the limit is Rs 12.75 lakh (which includes the Rs 75,000 standard deduction).
• These changes aim to boost household consumption, savings, and investment, stimulating economic growth.

New Income-Tax Bill:

• The new bill offers clearer and more direct text, making it easier for taxpayers to understand and comply with tax regulations.
• This simplification reduces litigation and promotes tax certainty, fostering a smoother administration process.

Revenue Impact:

• The changes are expected to forgo approximately Rs 1 lakh crore in direct tax revenues, marking a significant reduction in government receipts.

TDS/TCS Rationalization:

• The number of rates and thresholds for TDS (Tax Deducted at Source) has been reduced, making it simpler for taxpayers to navigate the system.
• Senior citizens will benefit from doubled tax deduction limits on interest, now set at Rs 1 lakh.
• The threshold for TDS on rent has been increased to Rs 6 lakh annually, offering relief to both landlords and tenants.
• The LRS remittance TCS threshold is raised to Rs 10 lakh, benefiting individuals making overseas remittances.
• Higher TDS deductions will now only apply for non-PAN cases, streamlining the process for individuals with valid PAN numbers.
• Decriminalization of delayed TCS payment cases aims to reduce the legal burden on taxpayers.

Compliance Burden Reduction:

• Small charitable trusts and institutions now have their registration period extended to 10 years, providing greater operational stability.
• Self-occupied property benefit is now available for up to two properties, helping taxpayers who own multiple homes.

Ease of Doing Business:

• A three-year block period scheme for arm’s length price determination is introduced, simplifying international taxation rules.
• Expanded safe harbour rules provide clarity and ease for international taxation, reducing the compliance burden for multinational companies.
• NSS withdrawals will be exempted from tax starting 29th August 2024, enhancing benefits for savers.
• NPS Vatsalya accounts will be treated similarly to regular NPS accounts, offering consistent benefits for account holders.

Employment and Investment:

• The government has provided tax certainty for electronics manufacturing schemes, promoting growth in the sector.
• The Tonnage Tax Scheme has been extended to inland vessels, benefiting the domestic shipping industry.
• The start-up incorporation period has been extended by 5 years (until 1st April 2030), helping new businesses grow without the pressure of early tax liabilities.
• Certainty of taxation has been established for Category I and II AIFs in infrastructure, attracting more investment into these funds.
• Investment date extension for Sovereign and Pension Funds has been moved to 31st March 2030, encouraging long-term investments in India.

Indirect Tax Reforms

Customs Tariff Structure Rationalization:

• The government has removed seven tariff rates to simplify the customs tariff structure.
• A unified single cess or surcharge policy has been introduced, applying appropriately across sectors.
• The revenue impact of these changes is Rs 2600 crore forgone, reflecting a commitment to improving the ease of trade.

Import Relief on Drugs/Medicines:

• Full BCD (Basic Customs Duty) exemption has been provided for 36 lifesaving drugs, making them more affordable.
• A 5% concessional duty has been introduced for six additional lifesaving medicines.
• BCD exemption applies to specified drugs under Patient Assistance Programs, improving access to essential medicines.

Domestic Manufacturing Support:

• Critical Minerals: BCD exemption for various minerals that are vital for domestic manufacturing.
• Textiles: Exemptions and rate revisions have been made for machinery and fabrics, encouraging the growth of the textile sector.
• Electronic Goods: BCD changes for IFPD (Integrated Flat Panel Display) and other components will lower costs in the electronics sector.
• Lithium-Ion Battery: Exemptions for capital goods will help bolster India’s electric vehicle manufacturing capabilities.
• Shipping Sector: Extended exemptions for raw materials crucial to the shipping industry, promoting domestic manufacturing.
• Telecommunication: BCD reduction on Carrier Grade Ethernet switches aims to support the telecom industry’s growth.

Export Promotion:

• Handicraft Goods: The export timeline for these goods has been extended, and duty-free inputs have been continued, benefiting artisans.
• Leather Sector: BCD exemptions and the removal of export duties will encourage more leather exports from India.
• Marine Products: BCD reductions for specific items in the marine sector will increase exports in this industry.
• Domestic MROs for Railway Goods: Import benefits and extended time limits will support the repair and maintenance sector for railway goods.

Trade Facilitation:

• A fixed time limit for Provisional Assessment will expedite the process of customs clearance.
• A new provision for voluntary compliance encourages self-correction and reduces enforcement actions.
• Extended time for end-use of imported inputs will allow more flexibility in inventory management.
• Simplified reporting for importers ensures easier compliance with customs regulations.

These reforms aim to streamline taxation processes, reduce compliance burdens, and create a more business-friendly environment. By simplifying both direct and indirect tax structures, the government seeks to enhance efficiency, encourage investment, and promote economic growth across various sectors.

Indian Budget: Paving the Way for Growth Through Tax Simplification and Economic Reforms

The Indian Budget reflects a strategic move towards simplifying tax systems, boosting exports, and fostering domestic manufacturing, all while enhancing financial inclusivity. Through measures like income tax relief, decriminalization, and rationalized customs duties, the government aims to create a more business-friendly environment. The reforms not only reduce compliance burdens but also promote economic growth by attracting investments and supporting various sectors such as healthcare, electronics, and textiles. With a focus on clarity, certainty, and ease of doing business, this budget sets the stage for a more competitive and sustainable Indian economy in the global market.

Prelims Practice Question 

With reference to the Constitution of India, consider the following statements regarding the Union Budget:

1. The Annual Financial Statement, or Union Budget, is presented to the Parliament under Article 112 of the Constitution of India.
2. The Budget is classified into two broad components—Revenue Budget and Capital Budget.
3. The Rajya Sabha has the power to amend the Appropriation Bill as part of its legislative role.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2, and 3

Answer:
(a) 1 and 2 only

Explanation:

• Statement 1: Correct. The Annual Financial Statement (Union Budget) is mandated by Article 112 of the Constitution of India. It is a statement of estimated receipts and expenditures for the following financial year.
• Statement 2: Correct. The Budget is indeed classified into two parts—Revenue Budget (which includes receipts and expenditures of a revenue nature) and Capital Budget (which includes capital receipts and expenditures).
• Statement 3: Incorrect. The Rajya Sabha cannot amend the Appropriation Bill. It can only discuss it, as the final authority on matters related to money bills rests with the Lok Sabha as per Article 110 of the Constitution.

Mains Practice Question 

The Union Budget 2025-26 emphasizes fiscal consolidation while prioritizing capital expenditure and agricultural development. Critically analyze the budget’s approach to balancing fiscal prudence with economic growth, and evaluate its potential impact on rural development and overall economic resilience. (250 W, 15 M)