In line with the Government’s approach of ‘big’ and ‘bold’ initiatives to take India forward, the Union Budget 2025-26 lays out a bold blueprint for taking India forward towards Viksit Bharat while also addressing the present needs of the Indian economy. A lot of emphasis has been given to encouraging consumption spending not only through the cut in income tax but also through measures to support labour-intensive sectors to create jobs, social security to gig workers among others.
The focus on reforms is high and this will help unlock the growth potential of the Indian economy, firmly placing it on the path of Viksit Bharat. The regulatory reforms with emphasis on light touch regulatory framework will strengthen the investment attractiveness of India. Power reforms, with an additional borrowing allowance of 0.5% of GSDP to states, will help improve the competitiveness of industry in India. Tax reforms continue with rationalisation in the tariff structure and the proposed introduction of a new income tax bill. The financial sector regulatory reforms will help the sector to grow and finance India’s growth. Urban Development, driven by the Rs 1 lakh crore Urban Challenge Fund, with the goal of making the urban centers as hubs of economic activity will provide a major boost to growth.
The emphasis on fiscal reforms continues, with a fiscal deficit of 4.8 per cent of GDP for FY25 against a budgeted target of 4.9 per cent and a target of 4.4 per cent for FY 26. The roadmap to reduce the debt to GDP ratio is a step in the right direction, further bolstering the fiscal health of the Indian economy, for continued macro-economic stability, in times of great global uncertainty. Measures to reduce the tax burden on the middle class substantially, such that there is no tax liability on income of upto Rs 12 lakh, from the earlier Rs 7 lakh, will drive consumption. Consumption is the largest constituent of India’s GDP, at around 56 per cent, and has seen some sluggishness. These measures will therefore provide a direct boost to growth.