On February 1, 2025, India’s Finance Minister Nirmala Sitharaman presented the Union Budget,
introducing significant measures aimed at stimulating economic growth, bolstering the middle
class, and addressing key sectors such as agriculture and infrastructure.
Income Tax Reforms
A notable highlight of the budget is the substantial revision of personal income tax rates. The tax
exemption threshold has been elevated to ₹12.8 lakh, up from the previous ₹7 lakh.
Additionally, reduced tax rates have been introduced for incomes above this new threshold.
These adjustments are designed to enhance middle-class consumption, savings, and
investment, despite an anticipated annual revenue loss of about ₹1 trillion.
Agricultural Initiatives
The budget places a strong emphasis on agriculture, launching a six-year program to boost the
production of pulse crops and cotton, aiming to reduce dependence on imports. State agencies
will procure pulses such as pigeon peas, black matpe, and red lentils at guaranteed prices to
support farmers. Furthermore, the government plans to increase cotton production, particularly
of extra-long staple cotton, through research and development initiatives. A “national mission”
has also been announced to develop high-yielding seed varieties, addressing challenges arising
from shrinking farmlands and erratic weather.
Support for the Gig Economy
Recognizing the growing gig economy, the budget proposes measures to formalize gig workers,
improving their access to healthcare and welfare initiatives. This move aims to provide better
social security and support to individuals engaged in gig and platform-based work.
Infrastructure and Energy Development
The government has outlined plans to invest in startups, innovation, tourism, infrastructure
development, and the energy sector. Notably, a Nuclear Energy Mission has been announced
with the goal of achieving 100 GW of nuclear power by 2047, underscoring India’s commitment
to sustainable energy sources.
Fiscal Outlook
The budget projects a reduction in the fiscal deficit to 4.4% of GDP in the 2025-26 fiscal year.
To finance this deficit, the government plans to borrow ₹14.82 lakh crore. Despite the tax cuts
and increased spending in various sectors, the government remains committed to fiscal
consolidation.
Economic Growth Projections
The Economic Survey preceding the budget forecasts India’s GDP growth to be between 6.3%
and 6.8% in the upcoming fiscal year. While this indicates a slowdown compared to previous
years, the government is optimistic that the budget’s measures will revitalize the economy and
address challenges such as high youth unemployment and inflation.
Sectoral Impacts
The budget’s focus on increasing disposable income is expected to benefit sectors like fast-
moving consumer goods and automotive industries, with companies such as Hindustan
Unilever, Nestle, Maruti Suzuki, and Hero MotoCorp anticipated to experience positive impacts.
Conversely, the insurance sector may face challenges as higher tax slabs reduce the
attractiveness of tax-saving insurance products.
In summary, the Union Budget 2025 introduces comprehensive reforms aimed at stimulating
economic growth, supporting the middle class, and strengthening key sectors. The
government’s strategic focus on tax relief, agricultural development, and infrastructure
investment reflects its commitment to fostering a resilient and inclusive economy.
