The Union Budget 2025-26 seems like a dream come true for those who envision the government
acknowledging agriculture as the backbone of the Indian economy. It brings a host of benefits, including a revised income tax threshold that exempts a large section of income-tax payees earning up to Rs 12 lakh from taxation, along with the recognition of MSMEs as key drivers of economic growth.
It is acknowledgement that a course correction was long overdue and that the 2019 corporate tax cut, while boosting profits, did little to stimulate the economy. The move may benefit about 7 crore of 10.4 crore taxpayers. Hopefully, this marks the first step toward breaking away from the Manmohanomics that the NDA government had diligently adhered to.
Finance Minister Nirmala Sitharaman has raised hopes, hype and make everyone pine for an El Dorado. Despite her stress on agriculture and Dhandhanya Krishi Yojana, subsidies have been cut to a new low. And if one’s income assessment exceeds Rs 12 lakh, he has to pay taxes over Rs 4 lakh exempted level!
The budget takes a strategic step in addressing former U.S. President Donald Trump’s tariff war by reducing duties on Harley- Davidson and 1600cc motorcycles to 30 percent, a move aimed at countering his criticism of India as the “tariff king.” India may be hoping this gesture will soften Trumpist rhetoric, even as he escalates tariffs against Canada, Mexico, and China—perhaps earning some taarif in return. Adding to this, the budget paves the way for mini-nuclear power plants, a lucrative shift timed perfectly with Prime Minister Narendra Modi’s visit to the U.S. amid a strengthening dollar.
It’s no surprise that the budget is designed to address the political dynamics of the crucial Delhi elections, its 17 lakh voters and the upcoming Bihar polls. The tax restructuring appears tailored for salaried individuals and small business owners, who form a significant demographic in Delhi, though its benefits extend to Bihar and beyond. But will it shift the political loyalties of the beneficiaries?
There is, however, no change in capital gains tax (CGT). The July 2024 budget brought almost every sale and purchase to the CGT causing consternation.
Despite Nitish Kumar continuing as Bihar chief minister, the political colour changed quite a few times. But Bihar could not get special economic package since 2000, the NDA-I, when Jharkhand was split out. The windfall now is aimed at winning Bihari hearts. The state gets a Makhana Board, National Institute of Food
Technology, Entrepreneurship and Management, greenfield airports in addition to expansion of Patna airport, a brownfield airport at Bihta, West Kosi Canal Project in Mithilanchal, road connectivity projects, power projects, such as setting up of a new 2,400-MW power plant at Pirpainti, medical colleges, Patna IIT expansion and sports infrastructure.
The Centre’s spending on subsidies for 2025-26 is budgeted to fall to a six-year-low in absolute terms and a seven-year-low relative to the country’s gross domestic product (GDP). Also, much of the outgo pressure is now coming from fertilisers, as opposed to food subsidy.
Finance Minister Nirmala Sitharaman has provided a total of Rs 426,216 crore towards all Central subsidies for the coming financial year, the lowest since the Rs 262,304 crore of 2019-20. In relative terms, the subsidy bill, at 1.19 per cent of GDP, would be the lowest since the 1.18 per cent for 2018-19. The reduced subsidy spend — from the peak of Rs 758,165 crore and 3.82 per cent of GDP in 2020-21 — are mainly on account of lower foodgrain disbursement.
With the annual grain offtake through the PDS and other schemes falling — from 93.7 million tonnes (mt) in 2020-21, 105.8 mt in 2021- 22 a projected 63.9 mt in 2024-25 – and the government’s procurement as well as stocks in godowns declining, reduced carrying cost of buffer beyond operational requirements, the food
subsidy is budgeted at just Rs 203,420 crore in the coming fiscal.
The poor may gradually take the brunt more. The kisans hope for a higher PM Kisan Saman Nidhi has come to a nought with bountiful of projects announced. The government feels that the projects would boost incomes in rural areas with The National Edible oil mission for self-sufficiency, six year- pulses mission, comprehensive programmes for vegetable and fruits, cotton production mission, Kisan Credit
Card limit rise to Rs 5 lakh from Rs 3 lakh, scheme for women SCST enterprises, and Rs 60,000 crore food exports programme.
Textiles to toys, the MSMEs get Rs 2250 crore booster shot with mission exports, Minister for Commerce Piyush Goel says. Their loan guarantee is doubled to Rs 10 crore from Rs 5 crore. The MSMEs contribute 45 percent of exports and some of them are over Rs 500 crore companies. Their growth would be creating jobs as well, is the hope.
The budget is expected to boost consumption with Rs 1 lakh crore I-T cut. The National Manufacturing Mission with a special focus on electronics manufacturing services is projected to generate 2.3 million
jobs. The plan to have 10000 startups, realty rise, aviation, tourism, healthcare and retail global capacity centres (GCC) may spur jobs.
It is expected that infra investment that remains at Rs 10.18 lakh crore (against Rs 11.1 lakh crore estimates in 2024). In 2026 too it would marginally vary. There is a reservation – high infra spending cause higher finance drains. The losses in built-up unusable infra mounts.
The budget is stated to balance borrowings as deficit is to be checked at 4.4 percent. Borrowing is set at Rs 11.5 lakh crore. Estimates for capital expenditure is set at Rs 11.21 lakh crore and a total of Rs 15.4 lakh crore, infra expenses. Even the US is wary of such high infra investments. The budget is silent about Indian Railways with its estimates frozen at 2024 level of Rs 2.55 lakh crore. Defence has seen minor rise
Rs 6.81 lakh crore against Rs 6.21 lakh crore, education rises by Rs 128,650 crore and health Rs 99,858.56 crore against from Rs 90,958.63 crore in 2024-25. Healthcare stresses on anti-cancer measures, research, healthier and more resilient India.
Still FDI and FPI investments remain in the grey area. The FMCG sector has large hopes as Godfrey Phiilips, Britannia Industries, Hindustan Unilever and ITC gained nine to four percent at the stocks though frontline indices had little gain. Overall, the budget has a new direction for boosting manufacturing though an integrated approach remains missing.
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