Amid accentuating global risks, new guard in the US White House and deepening uncertainties over tariffs, the Union Budget 2025 takes a balanced and equitable approach to spur the Indian economy. Announced six months after the July 2024 Budget, the provisions in this year’s Budget, are sharply focused on inclusivity with its four pillars as Garib, Yuva, Annadata and Nari (Poor, Youth, Farmers and Women) and invigorating private sector investment and enhancing consumer spending.
Reduction in fiscal deficit from 4.8 per cent in FY25 to 4.4 per cent in FY26 reflects a commitment to fiscal consolidation and improved debt management aimed at enhancing macroeconomic stability and investor confidence while not relenting on capital expenditure. By enlisting Micro, Small and Medium Enterprises (MSMEs), investments, and exports as the three powerful engines of growth alongside agriculture, the Finance Minister has emphasised on accelerating balanced growth in India’s journey of development.
To unlock India’s growth potential and make it truly Atmanirbhar, the Budget has offered a major credit boost to MSMEs as well as start-ups. These measures will prove extremely encouraging for new businesses and especially supportive for first-time entrepreneurs boosting employment and growth in productivity. The Budget has also made several provisions to make further investments in people and skilling through additional seats in medical colleges, creation of additional infrastructure in IITs, setting up for 50,000 Atal tinkering labs in government schools. In addition, socio-economic upliftment reforms for gig-workers is a much needed move for the welfare of these youth.
Beyond that, rationalizing the requirements and procedures for speedy approval of company mergers, setting up of a high-level committee for regulatory reforms in the non-financial sector, and an investment-friendliness index for states.
Notably, the rise of AI/GenAI in the tech space is revolutionising various aspects of governance, economy, security, and society at large. To this effect, a dedicated centre of excellence for artificial intelligence (AI) in education with an outlay of Rs 500 crore is a welcome move.
Furthermore, plans to set up five National Centres of Excellence for Skilling, designed to equip youth with industry-relevant expertise, will provide an opportunity for companies to make the most of industry 4.0 which is in an urgent need for high skills and talent.
Other strategic initiatives outlined in Budget 2025, including the Export Promotion Mission and Bharat Trade Net, represent a major leap forward in strengthening India’s trade and export capabilities. For instance, as a digital public infrastructure, Bharat Trade Net, will be instrumental in streamlining trade documentation and financing, thus creating a seamless experience for businesses. Coupled with the Unified Logistics Platform, these efforts will significantly enhance the competitiveness of Indian businesses on the global stage, unlocking new opportunities and driving economic growth.
Finally, by providing tax relief to individuals earning an income of up to ₹12 lakh, the Budget has kept its word to the middle class of putting more money into their pockets, thus creating more disposable income and consumption, especially of non-essential commodities. We now look forward to the introduction of the New Income Tax Bill, which will considerably simplify the existing Income Tax Act of 1961, which is a landmark move towards simplified tax regime, further fostering a conducive environment for growth and innovation.
On the corporate tax front, there was an expectation about extension of concessional tax regime for new manufacturing companies and reintroduction of incentives for R&D, which did not come through.
Overall, the Budget aligns well with global trends and prepares the Indian economy to remain competitive on the international stage. This Budget has something for all sects of the society and lays a very strong foundation for larger financial reforms. One would resonate with the Finance Minister when she remarked that Democracy, Demography and Demand are the key support pillars in our journey towards Viksit Bharat. Our true success, however, will depend on effective implementation and collaboration between government, industry, and other stakeholders and our ability to navigate the brewing geopolitical tensions.
A version of this article was published by Business Standard. The same can be read here
