Union Budget 2025-26
Context:
Recently, the Union Finance Minister announced the Union Budget 2025–26. It highlighted the government’s commitment to accelerate economic growth while maintaining fiscal prudence.
Relevance:
GS-03 (Indian Economy)
Key Highlights of Union Budget 2025-26
- Personal Income Tax Relief and Economic Growth
- Capital Expenditure and Infrastructure Development
- Strengthening the Manufacturing Sector
- Focus on Labour-Intensive Sectors
- Maritime and Aviation Growth
- Agricultural Reforms and Rural Development
- Fiscal Prudence and Macroeconomic Stability
- Ease of Doing Business and Trade Reforms
Personal Income Tax Relief and Economic Growth
- The personal income tax slabs saw a significant change.
- For individuals earning up to ₹12 lakh annually (₹12.75 lakh for salaried taxpayers due to the ₹75,000 standard deduction), complete tax exemption was announced, just so it creates a multiplier effect on economic growth.
- This exemption is expected to increase the disposable income that will boost consumer spending, leading to increased demand in sectors like retail, real estate, and automobiles, which are very important for economic growth.
- It will also improve business performance in the economy. The rising demand due to increased disposable income guarantees higher indirect tax revenues for the government, which will enable the government to increase their spending, which shall create more employment opportunities.
Capital Expenditure and Infrastructure Development
- The 2025–26 budget has set aside ₹11.2 lakh crore for capital expenditure.
- This allocation is 10% more than the previous year, as is expected to drive economic growth.
- Strengthening logistics and industrial infrastructure will enhance supply chain efficiency and reduce costs.
- Public investment in infrastructure has a crowding-in effect, encouraging private sector participation.
- Employment generation in construction and allied industries will provide a direct boost to GDP growth.
Strengthening the Manufacturing Sector
- The government has launched the National Manufacturing Mission under the ‘Make in India’ initiative to promote domestic production, which aims to reduce import dependency, enhance global competitiveness, and attract foreign investment.
- Moreover, collaborations with central ministries and state governments on various fronts are expected to provide policy support, execution roadmaps, and governance frameworks.
- The budget highlighted the need to simplify regulatory procedures and to increase targeted incentives to make India a global manufacturing hub.
Focus on Labour-Intensive Sectors
- The budget prioritises employment-intensive sectors like tourism, food processing, and leather industries by providing targeted incentives and streamlining regulations.
- These industries boost India’s global trade position while also ensuring productivity and competitiveness.
Maritime and Aviation Growth
- The launch of a Maritime Development Fund aims to bolster the blue economy, especially in coastal states. Additionally, the expansion of the UDAN scheme to connect 120 new destinations will unlock economic potential in emerging regions.
- Increased connectivity will spur regional trade and tourism.
- Enhanced maritime infrastructure will support logistics and port-led development.
Agricultural Reforms and Rural Development
- The Prime Minister Dhan-Dhaanya Krishi Yojana targets 100 districts with low agricultural productivity and limited credit access. This initiative focuses on:
- Crop diversification and sustainable practices to enhance productivity.
- Post-harvest storage infrastructure and irrigation improvements.
- Facilitating access to rural credit for nearly 1.7 crore farmers, boosting agricultural incomes.
- Higher rural purchasing power will benefit industries linked to the agriculture supply chain and consumer goods sector.
Fiscal Prudence and Macroeconomic Stability
- The budget aims to reduce the fiscal deficit from 4.8% in 2024-25 to 4.4% in 2025-26, a crucial step for economic stability.
- A lower fiscal deficit curbs inflationary pressures, ensuring price stability.
- A stable macroeconomic environment enhances investor confidence, attracting foreign capital.
Ease of Doing Business and Trade Reforms
The budget introduces measures to simplify India’s tax and trade policies:
- Tariff rationalisation by eliminating seven additional tariff rates.
- Limited cess and surcharge imposition ensures a predictable taxation regime.
- Correction of the inverted duty structure enhances trade competitiveness and global supply chain integration.
Conclusion:
The Union Budget 2025-26 aligns with India’s long-term economic ambitions and also reflects the government’s commitment to kick-start growth in shaping India’s economic trajectory.