Union Budget 2025-26: Key Highlights

Photo Courtesy: economictimes.indiatimes.com

On February 1, 2025, Finance Minister Nirmala Sitharaman presented the Union Budget for the fiscal year 2025-26, marking a pivotal moment in India’s economic trajectory. This budget, the first full financial plan of Prime Minister Narendra Modi’s third term, aims to bolster economic growth, provide relief to the middle class, and address critical sectors such as Defense, Railways, Agriculture, Infrastructure, and Technology. Key Highlights of the Union Budget 2025-26.

Taxation Reforms
- Income Tax Relief for Middle Class: significant announcement is the complete tax rebate for individuals with an annual income up to ₹12 lakh.his move is expected to benefit approximately 10 million taxpayers, increasing their disposable income and potentially boosting consumer spending.
- Revised Income Tax Slabs: The income tax slabs under the new tax regime have been revised as follows:
  Income Range (₹): Tax Rate
  Up to 4,00,000: Nil
  4,00,001 to 8,00,000: 5%
  8,00,001 to 12,00,000: 10%
  12,00,001 to 16,00,000: 15%
  16,00,001 to 20,00,000: 20%
  20,00,001 to 24,00,000: 25%
  Above 24,00,000: 30%
  Additionally, the standard deduction has been increased to ₹75,000 from the previous ₹50,000, providing further relief to salaried individuals.
Defense Allocation
- Increased Defense Budget: The defense budget has been proposed at ₹6.81 trillion, marking a 9.5% increase from the previous year. However, a significant portion, ₹4.7 trillion, is allocated for manpower costs, including wages and pensions, leaving ₹1.80 trillion for capital outlay focused on modernization and procurement of new weapons. Analysts suggest that this capital outlay, despite a 4.6% increase from the previous year, may be insufficient for India’s modernization efforts, particularly to counter regional challenges.
Railways and Infrastructure Development
- Enhanced Railway Budget: The Ministry of Railways has been allocated ₹2.65 trillion, with a focus on modernization projects aimed at expanding capacity and enhancing travel speed and safety.his investment aligns with the government’s goal to achieve net-zero carbon emissions for the railways by 2030. The initiatives include the expansion of over 68,000 km of track and the introduction of 400 high-speed Vande Bharat trains by March 2027.
- Urban Transformation Fund: An allocation of ₹1 lakh crore has been made to transform urban cities. The fund will implement proposals for developing cities as growth hubs, creative redevelopment, and water conservation projects.
Support for Micro, Small, and Medium Enterprises (MSMEs)
- Credit Support and Formalization: The budget introduces measures to provide credit support to MSMEs, aiming to enhance their access to financing and encourage formalization.his includes initiatives to improve access to healthcare and welfare programs for gig economy workers, recognizing the growing importance of this workforce segment.
Agriculture and Rural Development
- Prime Minister Dhan-Dhaanya Krishi Yojana: A new initiative aimed at developing 100 agricultural districts, benefiting approximately 17 million farmers. The program focuses on enhancing crop yields, promoting sustainable farming practices, and improving market access for farmers.
- Enhanced Credit through Kisan Credit Card (KCC): The government plans to facilitate short-term loans for 77 million farmers, fishermen, and dairy farmers, with an enhanced loan limit of ₹5 lakh. This initiative aims to provide timely credit support to the agriculture sector.
- Self-Reliance in Pulses Production: A six-year mission has been launched with a special focus on pulses such as Tur, Urad, and Masoor.he program includes state agencies purchasing these pulses at guaranteed prices to support farmers and reduce reliance on imports.
- Establishment of Makhana Board: Recognizing the importance of Makhana (fox nuts) cultivation, a dedicated Makhana Board will be set up in Bihar to promote research, development, and marketing of this unique crop.
Science, Technology, and Innovation
- Research, Development, and Innovation Initiative: An allocation of ₹20,000 crore has been made to implement a private sector-driven research and development initiative, encouraging innovation and technological advancements.
- PM Research Fellowship: The government will provide 10,000 fellowships for technological research in premier institutions like IITs and IISc, fostering a culture of innovation and research excellence.
- Centre of Excellence for AI in Education: A new Centre of Excellence for Artificial Intelligence in Education will be established with an outlay of ₹500 crore, aiming to integrate AI into the education sector and enhance learning outcomes.
Energy and Environment
- Nuclear Energy Mission: The government has announced a Nuclear Energy Mission with the goal of achieving 100 GW of nuclear power by 2047, contributing to clean energy goals and reducing carbon emissions.
- Gene Bank for Crop Germplasm: The second Gene Bank, housing 10 lakh germplasm lines, will be established to ensure future food and nutritional security by preserving genetic diversity in crops.
Social Welfare and Employment
- Rural Employment Guarantee Scheme (MGNREGA): The allocation for the Mahatma Gandhi National Rural Employment Guarantee Act remains at ₹86,000 crore, continuing to provide minimum wage jobs for 100 days annually to rural households.
- Social Security for Gig and Platform Workers: Recognizing the growing gig economy, the government has announced a Social Security Scheme for online platform workers. This initiative includes the provision of identity cards, registration on the e-Shram portal, and healthcare benefits under the Pradhan Mantri Jan Arogya Yojana. These measures aim to provide gig workers with access to essential social security benefits.
- Strengthening Urban Livelihoods: A new scheme has been introduced to uplift urban workers by helping them improve their incomes and achieve sustainable livelihoods. This initiative focuses on skill development, financial inclusion, and access to social welfare programs, thereby enhancing the economic well-being of urban laborers.
- Revamping PM SVANidhi Scheme: The PM SVANidhi scheme, which supports street vendors, is set to be revamped. Enhancements include increased loan amounts from banks, the introduction of UPI-linked credit cards with a ₹30,000 limit, and capacity-building support. These measures aim to provide financial stability and growth opportunities for street vendors.
- Employment Generation in Tourism: To facilitate employment-led growth in the tourism sector, the government plans to develop the top 50 tourist destinations in partnership with states. Additionally, initiatives to promote medical tourism under the “Heal in India” program will be undertaken in collaboration with the private sector. These efforts are expected to create numerous job opportunities in the tourism and healthcare industries.
- PM Awas Yojana: The allocation for the rural housing scheme has been increased to ₹79,000 crore, with a target of building 2 crore affordable houses.
- Women Empowerment: The budget has introduced the Mahila Samman Savings Certificate, a one-time small savings scheme offering a fixed interest rate of 7.5% for women.
- Tribal Welfare: The budget has allocated ₹15,000 crore for the development of Particularly Vulnerable Tribal Groups (PVTGs).
Criticisms and Challenges
- Lack of Structural Reforms: Critics argue that the budget prioritizes short-term economic relief, such as tax cuts for the middle class, over comprehensive structural reforms necessary for sustainable long-term growth.his approach is seen as insufficient to address underlying economic issues and to elevate growth rates to the desired 8%.
- Insufficient Capital Expenditure: The budget outlines an 11.2 trillion rupees capital expenditure plan for 2025-26.owever, some analysts believe this increase is modest and may not significantly boost infrastructure development, which is crucial for long-term economic growth. The perceived inadequacy in capital spending has raised concerns about the government’s commitment to enhancing infrastructure.
- Neglect of Social Security and Welfare Issues: Certain segments of society feel overlooked in the budget. For instance, the budget does not address issues related to pensions, social security, and the Minimum Support Price (MSP) demanded by farmers.dditionally, concerns related to gender equity have not been adequately addressed, leading to criticism from various social groups.
- Economic Slowdown and Inflation: The Indian economy is projected to experience its slowest growth in four years, attributed to weak urban demand and high food inflation. Despite measures to stimulate the economy, such as personal income tax cuts, these challenges persist and may hinder the effectiveness of the budget’s initiatives.
- Rising Unemployment: Persistent high unemployment rates remain a significant concern. The budget’s provisions may not be sufficient to generate the level of employment required to address this issue, leading to questions about the inclusivity of the proposed economic growth.
- Fiscal Discipline vs. Growth Stimulation: Balancing fiscal discipline with the need to stimulate growth presents a significant challenge.hile the budget aims to reduce the fiscal deficit to 4.4% of GDP, some experts argue that this focus on fiscal consolidation may limit the government’s ability to invest in growth-promoting sectors.
Conclusion
- While the Union Budget 2025-26 introduces measures aimed at stimulating the economy and providing relief to certain segments, it faces criticism for not addressing deeper structural issues and for potentially neglecting vulnerable populations. The challenges of balancing short-term relief with long-term growth, ensuring fiscal discipline while promoting investment, and addressing social welfare concerns remain pivotal for a democratically elected Government, as India navigates its economic future.