The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, sets the stage for India’s journey towards “Viksit Bharat”, or a developed India. With a strong focus on inclusivity, sustainability, and economic growth, the budget aims to invigorate the private sector, uplift household sentiments, and enhance the spending power of India’s rising middle class.
Theme and Vision of the Budget
The central theme revolves around accelerating growth while ensuring inclusive development. The vision is anchored on:
Four Growth Engines: Agriculture, MSMEs, Investment, and Exports.
Revamping Agricultural Districts: Prime Minister Dhan-Dhaanya Krishi Yojana
Agriculture remains the heart of India’s economy, supporting the livelihoods of millions. The government’s focus in this budget is to strengthen agricultural productivity, ensure food security, and empower farmers with better credit access. Prime Minister Dhan-Dhaanya Krishi Yojana aims to revamp 100 underperforming agricultural districts, transforming them into hubs of high productivity through improved irrigation systems, advanced farming techniques, and better access to financial services. This initiative is expected to directly benefit around 1.7 crore farmers, fostering sustainable agricultural practices and boosting rural incomes.
Achieving Self-Sufficiency in Pulses
To achieve self-sufficiency in pulses, the government has introduced a 6-year mission targeting crops like Tur, Urad, and Masoor. This mission focuses on developing climate-resilient, high-yield varieties that enhance protein content and reduce dependency on imports. In addition to boosting production, it aims to improve post-harvest management, ensuring farmers receive fair prices while minimising food wastage.
The National Mission on High-Yielding Seeds and the Mission for Cotton Productivity are set to drive agricultural innovation. These programs emphasise the adoption of climate-resilient seeds and sustainable farming practices to improve crop yields and reduce the impact of climate change. Cotton productivity, in particular, will benefit from modern farming techniques designed to enhance both yield and quality.
Recognising the increasing cost of agricultural inputs, the government has also enhanced the limit of the Kisan Credit Card (KCC) from ₹3 lakh to ₹5 lakh. This will give farmers(7.7 crore) greater financial flexibility to invest in modern equipment, high-quality seeds, and other essential resources, ultimately contributing to increased agricultural output and farmer welfare.
2. MSMEs: The Second Engine of Economic Growth
The Micro, Small, and Medium Enterprises (MSME) sector continues to be a pivotal force in driving India’s economic growth, employment generation, and innovation. With over 5.7 crore MSMEs employing around 7.5 crore people, the sector contributes significantly to India’s manufacturing output and exports. To unlock the sector’s full potential, the budget introduces comprehensive reforms focusing on credit enhancement, entrepreneurial support, and operational efficiency.
Revised Classification Criteria for MSMEs
To promote business scalability and encourage MSMEs to expand without losing access to government benefits, the budget has revised the classification criteria:
Investment limits have been increased by 2.5 times.
Turnover thresholds have been enhanced by 2 times.
This revision will enable more enterprises to qualify as MSMEs, thus expanding their access to credit facilities, subsidies, and policy incentives. The goal is to foster higher operational efficiencies, promote technological upgrades, and create more employment opportunities for the youth. This reclassification will also boost MSMEs’ confidence to grow and compete both domestically and globally.
Expanding Credit Access for MSMEs and Startups
Recognizing that access to affordable credit is a key challenge for MSMEs, the budget has significantly enhanced the credit guarantee cover:
For Micro and Small Enterprises (MSEs): The credit guarantee cover has been doubled from ₹5 crore to ₹10 crore, which is expected to unlock an additional ₹1.5 lakh crore in credit over the next five years.
For Startups: The cover has been raised from ₹10 crore to ₹20 crore, with a moderated guarantee fee of 1% for loans in 27 focus sectors critical to the Atmanirbhar Bharat initiative.
For Exporter MSMEs: Export-oriented MSMEs will now be eligible for term loans up to ₹20 crore, enhancing their ability to scale operations and compete in global markets.
Additionally, the government has introduced customized credit cards for micro-enterprises with a limit of ₹5 lakh, specifically for businesses registered on the Udyam Portal. The target is to issue 10 lakh such credit cards in the first year. These cards will simplify the credit process, offering quick and flexible working capital solutions to micro-entrepreneurs, thus promoting financial inclusion and reducing reliance on informal lending sources.
3. Investment: The Third Engine of National Progress
Investing in Human Capital: Education and Skill Development
Investment in infrastructure, human capital, and innovation is at the core of India’s development strategy. The budget reflects this through significant allocations aimed at fostering growth and enhancing the country’s global competitiveness. A key focus area is investing in people, with major expansions planned for educational and skill development institutions. The government has announced the establishment of 50,000 Atal Tinkering Labs in schools to promote scientific thinking and innovation among students. Additionally, there will be a significant increase in medical education capacity, with the addition of 10,000 new seats as part of a broader goal to create 75,000 new medical seats over the next five years.
Infrastructure Development: Capital Expenditure and Asset Monetization
The government has also prioritized infrastructure development to stimulate economic growth. States will receive ₹1.5 lakh crore in interest-free loans to support capital expenditure, targeting projects related to urban mobility, smart cities, and logistics. Complementing this is the Asset Monetization Plan (2025–30), which aims to raise ₹10 lakh crore by leveraging government-owned assets. The proceeds will be reinvested in critical infrastructure projects, enhancing connectivity and driving economic activity across the country.
Addressing Real Estate Challenges: SWAMIH Fund 2
Addressing the real estate sector’s challenges, the government has launched SWAMIH Fund 2 with a corpus of ₹15,000 crore to expedite the completion of stalled housing projects. This initiative will not only provide relief to homebuyers but also support the real estate sector’s recovery and job creation in construction and allied industries.
Nuclear Energy Mission: Towards Clean Energy Goals
The Nuclear Energy Mission represents a bold step toward meeting India’s clean energy goals. The government aims to achieve 100 GW of nuclear power capacity by 2047, with increased private sector participation facilitated through amendments to the Atomic Energy Act. This mission will diversify India’s energy mix, reduce reliance on fossil fuels, and support the country’s long-term sustainability goals.
4. Exports: The Fourth Engine Driving Global Competitiveness
Export Promotion Mission
The government will set up an Export Promotion Mission with clearly defined sectoral and ministerial targets. This mission will be driven jointly by the Ministries of Commerce, MSME, and Finance. The mission’s focus will be on:
Facilitating easy access to export credit for businesses to enhance their global competitiveness.
Providing cross-border factoring support to improve exporters’ financial access
Offering support to MSMEs to address non-tariff measures in overseas markets, enabling them to expand their global footprint.
BharatTradeNet (BTN): Digital Infrastructure for International Trade
A new digital public infrastructure, called BharatTradeNet (BTN), will be established as a unified platform for trade documentation and financing solutions. BTN will:
Complement the Unified Logistics Interface Platform, enhancing the efficiency of international trade operations.
Be aligned with international practices to streamline documentation, improve transparency, and simplify processes for exporters.
Support for Integration with Global Supply Chains
To strengthen India’s position in the global economy, support will be provided to develop domestic manufacturing capacities for better integration with global supply chains. The key initiatives include:
Identifying sectors based on objective criteria to promote industries with high potential for global integration.
Forming facilitation groups comprising senior government officers and industry representatives to support select products and supply chains.
Recognizing the potential in Industry 4.0, which demands high skills and talent—areas where India’s youth excel. The government will support the domestic electronic equipment industry to leverage these opportunities for the benefit of the youth.
National Framework for Promoting Global Capability Centres (GCCs)
A national framework will be formulated to guide states in promoting Global Capability Centres (GCCs) in emerging tier-2 cities. This framework will suggest:
Measures to enhance the availability of talent and infrastructure.
Building by-law reforms to support ease of setting up operations.
Mechanisms for effective collaboration with the industry to boost the GCC ecosystem.
Upgradation of Warehousing Facilities for Air Cargo
The government will facilitate the upgradation of infrastructure and warehousing for air cargo, focusing on:
High-value perishable horticulture produce, ensuring efficient handling and storage for export.
Streamlining cargo screening and customs protocols to make processes more user-friendly for exporters.
Taxation Reforms
Direct Taxes
Personal Income Tax Reforms
The budget introduced significant reforms aimed at simplifying the personal income tax structure and providing relief to the middle class. One of the most notable changes is the tax exemption for income up to ₹12 lakh, providing substantial relief to salaried individuals and small business owners. This move is designed to increase disposable income, stimulate consumption, and boost overall economic activity.
The new tax slabs are structured to ensure progressive taxation while reducing the burden on the middle-income group. The slabs are as follows:
Income Tax Slab
Current Tax Rate
Revised Tax Rate
₹0 to ₹3 Lakh
NIL
NIL
₹3 Lakh to ₹4 Lakh
5%
NIL
₹4 Lakh to ₹8 Lakh
10%
5%
₹8 Lakh to ₹10 Lakh
10%
10%
₹10 Lakh to ₹12 Lakh
15%
10%
₹12 Lakh to ₹15 Lakh
20%
15%
₹15 Lakh to ₹16 Lakh
30%
15%
₹16 Lakh to ₹20 Lakh
30%
20%
₹20 Lakh to ₹24 Lakh
30%
25%
₹12.75 lakh for salaried taxpayers due to the standard deduction of ₹75,000.
These changes aim to simplify tax calculations and reduce compliance complexities for taxpayers.
TDS/TCS Simplifications
To ease the tax compliance burden, the budget has proposed the rationalization of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Key changes include:
Higher TDS exemption limits for senior citizens, doubling the deduction limit from ₹50,000 to ₹1 lakh, ensuring better financial security for retirees.
Increased TDS limit on rental income from ₹2.4 lakh to ₹6 lakh, reducing the compliance load for landlords, especially those earning moderate rental income.
Ease of Compliance
Recognizing the challenges taxpayers face in correcting errors or omissions in their returns, the budget has extended the window for filing updated income tax returns from 2 years to 4 years. This provides greater flexibility for voluntary compliance, allowing taxpayers to rectify mistakes without the fear of severe penalties.
Indirect Taxes
Customs Duty Rationalization
In line with the government’s focus on promoting domestic manufacturing and reducing the cost of essential goods, the budget proposes a simplified customs duty structure. Key highlights include:
Reduced duties on life-saving drugs, particularly for the treatment of rare diseases, cancer, and chronic conditions, making healthcare more affordable.
Duty reductions on components for Electric Vehicles (EVs), including lithium-ion batteries, to accelerate the adoption of green mobility solutions.
Simplification of tariff rates with the removal of multiple slabs, streamlining the customs process for businesses.
Trade Facilitation Measures
To promote ease of doing business and improve India’s global trade competitiveness, the budget introduces new measures:
Fixed timelines for provisional assessments to enhance predictability and reduce procedural delays.
Voluntary compliance schemes allow businesses to self-declare material facts post-clearance, with provisions to pay duties with interest but without penalties. This encourages transparency and reduces litigation risks.
Fiscal Outlook
The fiscal outlook for the upcoming year reflects the government’s commitment to fiscal prudence while maintaining growth momentum through strategic investments.
Fiscal Deficit: The budget targets a fiscal deficit of 4.4% of GDP, demonstrating a balanced approach to managing public finances while supporting economic recovery.
Net Market Borrowings: Estimated at ₹11.54 lakh crore, these borrowings will finance developmental projects, infrastructure expansion, and social welfare schemes.
Total Expenditure: Projected at ₹50.65 lakh crore, indicating robust government spending to drive growth, enhance public services, and support key sectors like health, education, and infrastructure.
Social Welfare and Inclusion
PM SVANidhi Scheme
The PM SVANidhi Scheme, originally designed to support street vendors affected by the pandemic, has been revamped to provide enhanced financial assistance. The scheme now offers:
Higher loan amounts to help vendors expand their businesses.
UPI-linked credit cards promote digital transactions and financial inclusion, enabling street vendors to participate actively in the formal economy.
Social Security for Gig Workers
Recognising the growing gig economy, the budget introduces comprehensive measures to provide social security for gig and platform-based workers:
Mandatory registration on the e-Shram portal to ensure better data management and targeted welfare schemes.
Healthcare benefits under PM-JAY (Ayushman Bharat) provide health insurance coverage for gig workers who often lack formal employment benefits.
Jal Jeevan Mission
The ambitious Jal Jeevan Mission, aimed at providing tap water connections to every rural household, has been extended till 2028. The budget allocates additional funds to achieve:
100% tap water coverage, ensuring safe drinking water for millions of households.
Improved water management practices to address water scarcity issues, especially in drought-prone areas.
Green Growth and Sustainability
Clean Tech Manufacturing
The budget emphasizes the transition towards a green economy, with a strong focus on clean energy technologies:
Solar PV Manufacturing: Incentives for domestic production of solar panels to reduce reliance on imports and promote renewable energy.
EV Battery Production: Support for lithium-ion battery manufacturing to boost electric mobility and reduce carbon emissions.
Green Hydrogen Initiatives: Investments in the green hydrogen ecosystem, positioning India as a global leader in clean fuel technologies for industries and transportation.
Maritime Development Fund
To strengthen India’s maritime sector, a ₹25,000 crore Maritime Development Fund has been established. The fund will:
Promote shipbuilding and port infrastructure development, enhancing India’s logistics capabilities.
Support the blue economy through investments in coastal infrastructure, shipping, and inland waterways to improve trade efficiency.
Nuclear Energy Mission
As part of India’s long-term strategy to meet clean energy goals, the budget introduces measures to accelerate the Nuclear Energy Mission:
Encouragement of private sector participation in nuclear projects through legislative reforms, including amendments to the Atomic Energy Act.
Focus on Small Modular Reactors (SMRs) and other advanced technologies to diversify India’s energy mix, reduce carbon emissions, and ensure sustainable power generation.
Conclusion
The Union Budget 2025-26 lays out an ambitious roadmap for India’s future, balancing growth with sustainability and inclusivity. It reflects the government’s commitment to transforming India into a globally competitive, resilient, and developed economy by 2047. Whether through empowering MSMEs, boosting infrastructure, or driving digital transformation, this budget sets the foundation for “Viksit Bharat.”
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