1.

Introduction

The Union Budget of 2025-26 was presented on 1st February 2025 by Smt.
Nirmala Sitharaman.

The Finance Minister presented the Union Budget 2025-26 with the theme
“Sabka Vikas,” aimed at stimulating balanced growth across all regions. In line
with this theme, the Finance Minister outlined the broad Principles of Viksit
Bharat, which encompass the following:

a) Zero poverty;
b) 100% good quality school education;
c) Access to high-quality, affordable, and comprehensive healthcare;
d) 100% skilled labour with meaningful employment;
e) 70% women in economic activities; and
f) Farmers making our country the ‘food basket of the world’.

2. Key Themes

Union Budget highlights that Agriculture, MSME, Investment, and Exports are
engines in the journey to Viksit Bharat using reforms as fuel, guided by the spirit
of inclusivity.

1. Agriculture
The Budget announced the ‘Prime Minister Dhan-Dhaanya Krishi Yojana’ in
partnership with states, covering 100 districts to increase productivity, adopt crop
diversification, augment post-harvest storage, improve irrigation facilities, and
facilitate the availability of long-term and short-term credit.

A comprehensive multi-sectoral ‘Rural Prosperity and Resilience’ programme will

be launched in partnership with states to address underemployment in
agriculture through skilling, investment, technology, and invigorating the rural
economy.

The Government will launch a 6-year “Mission for Aatmanirbharta in Pulses,” with
a special focus on Tur, Urad, and Masoor.

The loan limits will be increased from Rs. 3 lakh to Rs. 5 lakh for loans taken
through Kisan Credit Cards under the modified interest subvention scheme.
2. MSMEs
MSMEs constitute 45% of our exports. To help MSMEs achieve higher
efficiencies of scale, technological upgradation, and better access to capital, the
investment and turnover limits for classification of all MSMEs have been
enhanced to 2.5 and 2 times, respectively. Further, steps to enhance credit
availability with guarantee cover have also been announced.

The Minister announced that the Government will also implement a scheme to
make India a global hub for toys representing the 'Made in India' brand. She
added that the Government will set up a National Manufacturing Mission covering
small, medium, and large industries for furthering “Make in India.”

3. Investment
The Minister announced that 50,000 Atal Tinkering Labs will be set up in
Government schools over the next 5 years.

Broadband connectivity will be provided to all Government secondary schools

and primary health centres in rural areas under the Bharatnet project.

The Bharatiya Bhasha Pustak Scheme will be implemented to provide digital-

form Indian language books for school and higher education.

A Centre of Excellence in Artificial Intelligence for education will be established.

The Government will arrange for Gig workers’ identity cards, their registration on
the e-Shram portal, and healthcare under PM Jan Arogya Yojana.

The Minister proposed the National Geospatial Mission to develop foundational

geospatial infrastructure and data, which will benefit urban planning.

The Budget proposes the Gyan Bharatam Mission for the survey, documentation,
and conservation of more than 1 crore manuscripts with academic institutions,
museums, libraries, and private collectors. A National Digital Repository of Indian
knowledge systems for knowledge sharing is also proposed.

4. Exports
A digital public infrastructure, ‘BharatTradeNet’ (BTN) for international trade was
proposed as a unified platform for trade documentation and financing solutions.
The Finance Minister mentioned that support will be provided to develop
domestic manufacturing capacities for our economy’s integration with global
supply chains. She also announced that the Government will support the
domestic electronic equipment industry for leveraging the opportunities related to
Industry 4.0.

Major Reforms
A high-level committee for regulatory reforms will be set up for reviewing all non-
financial sector regulations, certifications, licenses, and permissions. A
mechanism will be set up under the Financial Stability and Development Council
to evaluate the impact of current financial regulations.

An investment friendliness index of states will be launched in 2025.

Jan Vishwas Bill 2.0 will be introduced to decriminalise over 100 provisions
across multiple laws.

The FDI limit for the insurance sector will be increased from 74% to 100% for
companies which invest their entire premium in India.

To improve credit access, credit guarantee cover will be increased: (i) from 5
crore rupees to Rs 10 crore for micro and small enterprises, (ii) from Rs 10 crore
to Rs 20 crore for start-ups, and (iii) up to Rs 20 crore for exporter MSMEs.

3. Financial Health

The government has estimated a nominal GDP growth rate of 10.1% in 2025-26
(i.e., real growth plus inflation)

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires
the Central Government to progressively reduce its outstanding debt, revenue
deficit and fiscal deficit, and to give 3 year rolling targets for these. Note that the
Medium-Term Fiscal Policy Statement has not provided rolling targets for budget
deficits since 2021-22.

Fiscal deficit is an indicator of borrowings by the government for financing its

expenditure. The estimated fiscal deficit for 2025-26 is 4.4% of GDP.

Revenue deficit is the excess of revenue expenditure over revenue receipts.

Such a deficit implies that the government needs to borrow funds to meet
recurring expenses which may not provide future returns. The estimated revenue
deficit for 2025-26 is 1.5% of GDP.
This is lower than the revised estimates of 2024-25 (1.9% of GDP). Revenue
receipts are estimated to increase by 10.8% in 2025-26, while revenue
expenditure is estimated to increase by 6.7%. Growth in revenue receipts is
driven by income tax, GST and corporate tax, which are estimated to grow by
14.4%, 10.9% and 10.4% respectively.

Primary deficit is fiscal deficit less interest payments. It is estimated to be 0.8% of

GDP in 2025-26.

Centre’s outstanding liabilities in 2025-26 are estimated to be 56.1% of GDP.

Outstanding liabilities had declined from 52% of GDP in 2013-14 to 49% of GDP
in 2018-19. From 2019-20 onwards, outstanding liabilities increased, reaching a
high of 61% of GDP in 2020-21, and have moderated thereafter. The government
aims to reduce the outstanding liabilities to around 50% of GDP by March 2031.

Per capita income is around Rs 2.00 lakh.

Indian economy is 5th largest in the world.

The comparison of Deficits with the previous Financial Year is given in the table
below.

The Ministry of Defence has the highest allocation in 2025-26, at Rs 6,81,210

crore, accounting for 13.4% of the total budgeted expenditure of the central
government. Other ministries with high allocations include: (i) Road Transport
and Highways (5.7% of total expenditure), (ii) Railways (5.0%), and (iii)
Consumer Affairs, Food and Public Distribution (4.3%).

MGNREGS has the highest allocation among schemes in 2025-26. The Jal
Jeevan Mission/National Rural Drinking Water Mission has the second highest
allocation in 2024-25. The PM-KISAN has the third highest allocation.

The subsidies are spent on Food, Fertilizers, Interest Subsidy and LPG subsidy
(in decreasing order).
The Indian government’s Rs 50.65 lakh crore expenditure in Budget 2025-26 will
be primarily funded through tax revenue, borrowings, and non-tax receipts.

4. Tax Changes

Tax slabs under the new tax regime have been modified. The proposed tax
structure is shown in the Tabl. Annual income of up to Rs 12 lakh will receive
100% rebate on the taxable income. Earlier, this only applied to income of up to
seven lakh rupees. The old tax regime remains unchanged.

A new income tax bill will be introduced in Parliament.

Time-limit to file updated returns for any assessment year is increased from two
to four years with a penalty of 60% and 70% of the income tax and interest
payable for third and fourth year, respectively.

Startups incorporated up to April 1, 2025 can currently avail income tax

exemption for three consecutive years during the first ten years of operation. This
period has been extended to cover startups incorporated upto April 1, 2030.