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Union Budget 2025-26: A Roadmap for Economic Growth and Stability

Union Budget 2025-26: A Roadmap for Economic Growth and Stability
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Ishfaq Gowher
Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 in Parliament today, outlining key reforms aimed at boosting economic growth, supporting agriculture, and increasing middle-class spending power. The budget focuses on infrastructure development, taxation reforms, and fiscal consolidation while maintaining a vision of long-term sustainability and economic resilience.
Tax Reforms and Relief for Middle-Class
One of the most significant announcements in this year’s budget is the revision in income tax slabs. The tax exemption threshold has been raised to ₹1.28 million, up from ₹700,000. This move is expected to boost disposable income and spur domestic consumption. Additionally, tax rates have been revised to make taxation more progressive, ensuring benefits for salaried individuals and small business owners.
The corporate tax structure remains unchanged, but the government has introduced additional incentives for startups and MSMEs to promote entrepreneurship and job creation. Furthermore, tax deductions for home loans and education loans have been increased, offering relief to families planning investments in housing and higher education.
Challenges and Criticism: Despite these changes, critics argue that the new tax slabs may not significantly benefit lower-income groups, as inflation continues to erode purchasing power. Additionally, some analysts believe that the tax benefits offered to MSMEs are insufficient to counter the rising operational costs faced by small businesses.
Agriculture and Rural Development Initiatives
To enhance agricultural productivity and reduce dependence on imports, the government has launched a six-year initiative focused on increasing the production of pulses and cotton. The plan includes state agencies purchasing pulses at Minimum Support Prices (MSP) to ensure stable incomes for farmers. Additionally, research programs have been announced to improve cotton yield and quality.
To further support rural economies, the budget allocates substantial funds for irrigation projects, rural infrastructure, and farmer welfare programs. Subsidies on fertilizers and crop insurance schemes have also been extended. Additionally, a new Agri-Tech Fund of ₹15,000 crores has been introduced to support digital transformation in farming practices, precision agriculture, and AI-driven forecasting systems.
Challenges and Criticism: While the government claims that these initiatives will strengthen the rural economy, many farmer unions have expressed concerns about delayed MSP payments and the lack of implementation transparency. Moreover, despite increased subsidies, the rising cost of fertilizers and agricultural machinery remains a major hurdle for small-scale farmers.
Manufacturing and Investment Boost
The budget emphasizes private sector involvement to accelerate economic expansion. A high-level committee has been set up to suggest regulatory reforms that will ease business operations. Additionally, an investment-friendliness index will be introduced to help streamline foreign direct investments (FDI) and domestic industrial growth.
Under the government’s ‘Make in India’ initiative, incentives have been extended to manufacturing sectors, including automobiles, electronics, and defense production. Special economic zones (SEZs) will be further developed to attract global investors. To further drive industrial growth, ₹10,000 crores have been earmarked for a new Innovation and Research Fund that will focus on AI, robotics, and clean energy technology.
Challenges and Criticism: Despite these efforts, manufacturing output remains below pre-pandemic levels, and the industry is still struggling with global supply chain disruptions. The ‘Make in India’ initiative has faced criticism for not attracting sufficient foreign investment, and industrialists argue that regulatory bottlenecks still pose significant challenges.
Infrastructure and Digital Transformation
A substantial portion of the budget is dedicated to infrastructure development, with investments directed toward national highways, railways, and regional air connectivity programs. A focus on renewable energy projects aligns with India’s commitment to environmental sustainability.
Additionally, ₹20,000 crores have been allocated to develop critical minerals essential for technology and green energy sectors. The expansion of digital infrastructure and artificial intelligence (AI) in governance and industries is also a major highlight. The Digital India program receives a ₹5,000 crore boost to support cybersecurity measures, broadband expansion in rural areas, and cloud-based digital governance solutions.
Challenges and Criticism: While the push for digital transformation is commendable, cybersecurity experts warn that India’s digital infrastructure still lacks adequate protection against cyber threats. Furthermore, rural internet penetration remains inconsistent, and many remote areas are yet to benefit from the government’s broadband expansion plans.
Healthcare and Social Welfare
Recognizing the need for a robust healthcare system, the budget allocates ₹1.5 trillion towards strengthening medical infrastructure, increasing the number of AIIMS-like institutions, and improving primary healthcare centers across rural and semi-urban areas. A new Universal Healthcare Scheme has been introduced to ensure affordable healthcare for lower-income groups, alongside enhanced funding for Ayushman Bharat.
Social welfare schemes targeting women and children have also seen increased funding, including a ₹12,000 crore allocation for maternal healthcare, nutrition programs, and skill development initiatives for women-led enterprises.
Challenges and Criticism: Despite increased healthcare spending, the public health sector still faces a shortage of doctors and medical staff. Many government hospitals continue to suffer from inadequate infrastructure, and rural healthcare services remain underfunded. Additionally, the implementation of new healthcare schemes often faces delays due to bureaucratic inefficiencies.
Fiscal Deficit and Economic Projections
The government has set an ambitious target to reduce the fiscal deficit to 4.4% of GDP, compared to 5.1% in the previous fiscal year. The total estimated expenditure for 2025-26 stands at ₹50.65 trillion, with a significant push towards capital investment to drive long-term economic growth.
Nominal GDP growth for the coming year is projected at 10.1%, reflecting optimism about global economic recovery and domestic demand.
Challenges and Criticism: Experts warn that the ambitious fiscal deficit target may be difficult to achieve given the increasing public expenditure. Some economists argue that the government’s heavy reliance on borrowing could lead to inflationary pressures and higher interest rates, potentially impacting growth.
Conclusion
The Union Budget 2025-26 presents a balanced approach to economic growth and fiscal prudence. With a strong focus on infrastructure, tax relief, healthcare, and manufacturing, the government aims to accelerate India’s trajectory as a global economic powerhouse. However, challenges such as inefficient policy implementation, slow rural development, and concerns over fiscal sustainability could hinder the budget’s overall impact.
As the economy navigates global uncertainties, these policies are expected to create a resilient framework for long-term prosperity. The coming months will determine the effectiveness of these measures in achieving their intended goals, with industry leaders and analysts closely monitoring their impact on key sectors.

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