"Union Budget 2025-26: Who Got the
Ladder, Who Got the Snake?"
Written by: Uttara Rambhia
Edited by: Rahul Jose
The Union Budget presented by the Indian Finance Minister Dr. Nirmala Sitaraman focused on
designing a growth empowering budget, targeting to keep inflation near 4% is one that
appearingly balances out inflation, fiscal deficits, credit availability schemes that enables a
higher ease of business execution in the journey of ‘Viksat Bharat’.
MSME’s Credit Enhancement & ‘Make in India’.
A significant increase in the credit guarantee cover for MSE’s from 5 (₹ Cr.) to 10 (₹ Cr.), 10 to
20 for Startups and for Exporter MSME’s. Over 5 lakh first time entrepreneurs inclusive of the
minorities are deemed to receive up to 2 cr loans in the next 5 years. This expands micro, small
and medium sized enterprises in terms of from their investment to an astonishingly 100%
increase in their turnover ratios.
Although supporting policies are advantageous, these industries may be susceptible to both
internal (such as supply chain interruptions) and external (such as global market swings and
commodity price volatility) shocks. The desired results of inclusive development may not be
achieved if these issues are not adequately managed. Simultaneously the ease and cost of
business execution is supported by these changes, this might enable a greater revenue provided
strong repayment measures are established.
GDP growth & Taxation Slabs
Total expenditure in 2025-26 is expected to be Rs 50,65,345 crore, which is an increase of 7.4%
over the revised estimate of 2024-25. The nominal GDP growth rate is expected to be 10.1%
with a 100% rebate on 12 Lakh income this will adequately increase disposable income and
consumption and investment expenditure. SWAMIH Fund will provide liquidity to stressed
residential projects, supporting the completion of 40,000 additional housing units.
TDS and TCS limits have been increased, this enhances consumption expenditure thereby
positively affecting GDP growth. A tax exemption has been granted to startups est April 1, 2025
for 3 consecutive years this ultimately fosters the ease of business execution. Ultimately, the
fiscal management is at risk due to the magnitude of the expenditure and tax exemption limits.
Education & Healthcare Amendments
Public spending on education is still just about 2.9% of GDP (2024), well below the 6% goal set
by the Kothari Commission. The nation's schools continue to receive inadequate funding, and
many of them lack even the most basic facilities. As a sobering reminder of the strain and
disregard in the education sector, the crisis has gotten so bad that the suicide rate among students
has now overtaken that of farmers. An equally concerning picture is painted by healthcare, which
shows that millions of Indians lack access to quality medical care due to a startling 2.4 million
hospital bed shortage. India appears to be ignoring its most important resource—people—instead
of capitalising on its demographic advantage.
There are more than 1.2 million teacher openings in the country, which means that many
government schools have overcrowded classes with student-teacher ratios higher than 50:1. Even
worse, learning outcomes are negatively impacted by the fact that about 40% of teachers chosen
by the government are not properly qualified. These problems are made worse in rural regions by
inadequate infrastructure, out-of-date curricula, and the digital divide, which significantly lowers
the standard of education for millions of people. Although India's healthcare budget looks to be
improving on the surface—it is true that the amount has climbed by more than 100%, from Rs.
33,150 crore in 2015–16 to Rs. 95,957 crore in 2025–26—a closer look reveals a much less
encouraging picture. With only 1.4 hospital beds per 1,000 people, India's hospital bed
availability is still extremely low despite the rise and well below the WHO standard.
Thus, considering the long term growth of any economy, an extensive expenditure in healthcare
and education is necessary to avail such future gains and a question whether this rise is only
justifiable due to the inflation occurring over the past few years and hasn't assessed the ground
reality.
Agriculture & Urban Development
The Union Budget 2025-2026 allocated ₹1,37,757 crore to the Ministry of Agriculture and
Farmers' Welfare. This was 2.7% of the total budget. Underperforming districts are the focus of
the Prime Minister Dhan-Dhaanya Krishi Yojana, which aims to increase productivity. This
might increase India's agricultural GDP, which now makes up about 18% of the country's total
GDP. The government aims to give farmers the tools and assistance they need to raise their
standard of living by raising lending limits and creating programs specifically for certain crops.
Enhanced domestic production of cotton and pulses might decrease reliance on imports, which
could decrease price swings for food and textile-related products. India's overall GDP growth
might increase by 0.4-0.6% if agriculture productivity increases by 2-3%. In 2024, India
imported ₹15,000 crore worth of pulses. A successful self-reliance program could save forex
reserves and reduce trade deficit.
Small farmers will benefit from greater liquidity since the Kisan Credit Card (KCC) Loan Limit
is raised from ₹3 lakh to ₹5 lakh.7.7 crore farmers stand to gain from simpler credit availability,
which will lessen their reliance on high-interest moneylenders. Rural purchasing power will
increase as a result of interest subvention, increasing rural consumption. The banking industry
is affected by the rise in rural credit demand, which will raise banks' and NBFCs' loan books
and may encourage the adoption of fintech in rural areas. By stabilizing farmers' input prices,
urea production expansion can avoid food production price shocks. Higher rural loan
availability, however, can lead to demand-driven inflation, necessitating monetary policy action
by the RBI. Retail inflation (CPI) may increase by 0.3-0.5% during the next two years if rural
incomes increase by 10% to 12%. However, these programs' efficacy will rely on how well they
are implemented at the local level, availability of resources, and the active participation of state
governments and other stakeholders.
Financial Sector Reforms and Development
The Foreign Direct Investment (FDI) limit for the insurance sector has been increased from 74%
to 100%, provided that companies invest the entire premium within India. This move is expected
to attract more foreign capital, enhance competition, and improve insurance penetration in the
country. In 2025, a redesigned Central KYC Registry is scheduled to launch with the goal of
streamlining and simplifying the KYC procedure. By lowering regulatory burdens, this initiative
will make it easier for both individuals and businesses to use financial services. This might boost
financial penetration by 10–15%, which would be advantageous for digital payment companies
like neobanks, BNPL (Buy Now, Pay Later), and UPI-based services.
Startups and MSMEs are going to benefit from accelerated market consolidation brought about
by simplified corporate mergers. India will become more desirable to foreign investors as a result
of amended BITs, which will promote FDI growth. Impact Estimate for Investment may, if well
executed, increase FDI inflows by $20–$30 billion yearly.If the reforms are carried out
successfully and without regulatory obstacles, India's GDP growth might increase by 1.5% to
2.5% during the subsequent five years.
India's objective of creating a $5 trillion economy is in line with the budget's emphasis on
increased FDI limits, simplified compliance, and financial deepening; nevertheless, successful
implementation is still crucial.The implementation bottlenecks for digital initiatives in businesses
and schools, geopolitical uncertainties influencing trade and foreign investment, and effective
execution are all critical to the success of Budget 2025-26, which lays out an ambitious roadmap
for economic growth.
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