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India’s Union Budget 2025-26: A Growth Roadmap or Political Strategy? While the government describes it as a “growth-oriented” budget, concerns remain regarding fiscal discipline, inflation, unemployment, and the political timing of key announcements.

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India's Finance Minister Nirmala Sitharaman Presenting Union Budget in the Parliament.

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NEW DELHI: : A Fine Balance Between Economic Reform and Electoral Considerations. Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 in Parliament, outlining the government’s vision for economic growth, infrastructure expansion, and global trade positioning. As her eighth consecutive budget, it focuses on middle-class tax relief, MSME support, rural development, and strategic investments in key sectors, positioning India for long-term growth under the Viksit Bharat 2047 vision.

While the government describes it as a “growth-oriented” budget, concerns remain regarding fiscal discipline, inflation, unemployment, and the political timing of key announcements, particularly those targeted at Bihar, which heads into assembly elections later this year.

Union Finance Minister of India,  Nirmala Sitaraman

At an international level, the budget signals India’s ambitions to position itself as a global manufacturing hub, reduce its dependence on Chinese imports, and enhance trade partnerships with Western economies. However, the absence of major new trade agreements and continued protectionist policies could limit India’s competitiveness in global markets.

Key Budget Highlights

1️⃣ Tax Relief for the Middle Class

•Individuals earning up to ₹12 lakh annually will now be exempt from income tax under the new tax regime.

•Expected to boost disposable income and drive consumption in sectors like real estate, automobiles, and consumer goods.

•However, critics warn that it could strain government revenue, increasing fiscal pressure.

2️⃣ Bihar Receives Special Attention

•Makhana Board establishment, Patna Airport expansion, and the Kosi Canal project announced.

•Analysts see this as a strategic move ahead of the 2025 Bihar Assembly elections, blending economic planning with political considerations.

3️⃣ Defence Budget Increased Amid Geopolitical Tensions

•Defence allocation raised to ₹6.81 lakh crore, up from ₹6.21 lakh crore last year.

•Focus on domestic defence manufacturing under Atmanirbhar Bharat.

•Driven by border tensions with China, growing military cooperation with the U.S., France, and Japan, and India’s strategic role in the Indo-Pacific region.

•Increased allocations for cybersecurity and space defence capabilities, reflecting global concerns over technological warfare.

4️⃣ Boost for Education, Skilling & Digital Expansion

•50,000 Atal Tinkering Labs to be established in government schools to foster innovation.

•Expansion of broadband connectivity in rural schools and health centers under Bharat Net Project.

•Collaboration with global technology firms to introduce AI, robotics, and blockchain training in universities.

5️⃣ Infrastructure & Rural Development Push

•Higher capital expenditure on highways, railways, irrigation projects, and affordable housing.

•MSMEs to receive easier access to credit and incentives for startups.

•India to attract more FDI in logistics and smart city projects, aligning with G20 infrastructure goals.

6️⃣ Trade Policy Adjustments & Global Positioning

•Customs duties revised to boost domestic manufacturing and export competitiveness.

•India’s widening trade deficit raises concerns about export sustainability.

•Absence of major trade agreements with EU and ASEAN limits India’s advantage over China and Vietnam.

•Tariffs on electronic imports from China increased, aiming to strengthen India’s semiconductor and electronics industry.

•India signals greater engagement with BRICS, QUAD, and IPEF for trade diversification.

7️⃣ Fiscal Deficit & Revenue Challenges

•Fiscal deficit projected at 5.8% of GDP, slightly lower than last year.

•24% of government revenue comes from borrowings, down from 27% in 2024-25.

•Income tax revenue share has increased from 19% to 22%, indicating greater reliance on direct taxation.

•Rising debt levels could impact India’s sovereign credit rating, a key concern for global investors.

Industry Reactions: Optimism with Caution

Positive Industry Responses

•Manufacturing & MSMEs: Business leaders praised the higher credit guarantees, investment in R&D, and tax rationalization to boost domestic manufacturing.

•Clean Mobility: Industry welcomed the focus on EV battery manufacturing, critical minerals, and sustainable mobility.

•Infrastructure: Investments in highways, logistics, and railways seen as a long-term economic driver.

•Tech Sector: AI-driven initiatives and data center investments expected to attract global IT giants.

Union Finance Minister Nirmala Sitaraman Presents Budget 2025-26

❌ Concerns Raised

•Fiscal Deficit: High government borrowing could impact foreign investment and macro stability.

•Trade Policy Gaps: Business groups emphasized the need for new trade agreements to enhance export competitiveness.

•Execution Risks: Delays in infrastructure and digital education projects in past budgets raise concerns over implementation.

Global Business Perspective

•JP Morgan: The budget aligns with India’s long-term economic growth, but fiscal discipline needs attention.

•HSBC: Welcomed the focus on trade positioning, but urged stronger global trade partnerships.

•Goldman Sachs: Raised concerns about the rising fiscal deficit and called for structural economic reforms.

•Moody’s & S&P: India’s high public debt could pose long-term economic risks, potentially impacting its credit rating outlook.

•World Bank & IMF: Praised India’s digital public infrastructure expansion but stressed the need for labor market reforms to create more jobs.

International Impact: India’s Global Positioning in 2025

India’s budget priorities align with its geopolitical ambitions, seeking to position itself as a global economic powerhouse while maintaining protectionist policies in key industries.

•Strategic Shift in Trade & Investment: The emphasis on domestic manufacturing and higher import tariffs on Chinese goods could reshape global supply chains, benefiting countries like Vietnam, Mexico, and Indonesia.

•Defence & Technology Partnerships: Increased defence spending could lead to new arms deals with the U.S., Russia, Israel, and France, strengthening India’s position in the Indo-Pacific security framework.

•Energy Transition & Climate Commitments: India’s investment in green hydrogen, solar power, and EV infrastructure aligns with G20 climate goals, but a lack of clear carbon tax policies raises concerns about long-term climate commitments.

•Global Investor Sentiment: The budget’s pro-business measures may attract more FDI in tech, finance, and renewable energy, though fiscal deficit concerns could make global investors more cautious.

Budget Session, Parliament of India

A Visionary Budget, But Can It Deliver?

The Union Budget 2025-26 presents a clear roadmap for economic growth, balancing tax reforms, infrastructure expansion, and industrial incentives. However, the political undertones—especially the targeted focus on Bihar—indicate a blend of economic planning and electoral strategy.

While defence spending aligns with India’s geopolitical realities, and digital investments support long-term transformation, global trade challenges, fiscal discipline, and unemployment remain critical issues.

With elections approaching, the success of this budget will depend on effective execution—whether it translates into real economic gains or remains an electoral pitch. The coming months will determine whether India can sustain its economic momentum amid global uncertainties.

-Dr. Shahid Siddiqui, follow @shahidsiddiqui on X

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