Fiscal Deficit

In the Union Budget for 2025-26, the government has set a fiscal deficit target of 4.4% of GDP for FY25-26, aligning with its goal of bringing the deficit below 4.5% by FY25-26. The revised fiscal deficit for FY24-25 stands at 4.8% of GDP, lower than the budgeted estimate of 4.9%.

The details of the revenues, expenditures and fiscal deficit are provided in the table below:

Notes: Figures in Rs lakh Cr., BE: Budget Estimates, RE: Revised Estimates, PA: 1 Provisional Actuals. Figures in parenthesis are as a percentage of GDP

Budget Estimates 2025-26

◈  Total expenditure for FY25-26 is estimated at Rs. 50.65 lakh crore, up from Rs. 47.16 lakh crore in FY24-

25. Of this, capital expenditure is projected at Rs. 11.21 lakh crore, compared to the revised capex spending of Rs. 10.18 lakh crore in FY24-25.

◈  Revenue expenditure is projected at Rs. 39.44 lakh crore, compared to Rs. 36.98 lakh crore in FY24-25.

◈ Total tax revenue for FY25-26 is estimated at Rs. 28.37 lakh crore, higher than total tax revenue of Rs.

25.57 lakh crore in FY24-25.

◈  Non-tax revenue for FY25-26 is estimated to be higher at Rs. 5.83 lakh crore, compared to Rs. 5.31 lakh crore in FY24-25.

The Path to Fiscal Consolidation

◈  The government has successfully met its fiscal deficit consolidation goal of reducing the deficit to below 4.5% by FY25-26.

Figures in Rs lakh crores, BE: Budget estimates, RE: Revised estimates

Market Borrowings

◈  Gross market borrowings of the central govt. is estimated at Rs. 14.82 lakh crore for FY25-26,

compared to revised estimates of Rs. 14.00 lakh crore in FY24-25.

◈  Net market borrowing for FY25-26 is estimated at Rs. 11.54 lakh crore, higher than revised estimates of Rs. 10.75 lakh crore in FY24-25.

◈  The balance financing of fiscal deficit is expected to come from small savings and other sources.

Figures in Rs lakh crores, BE: Budget estimates, RE: Revised estimates

Announcements on Taxation

Personal Income Tax

Under the new regime, the income limit for rebate under Section 87A has been increased from Rs 7 lakhs to Rs 12 lakhs, which means that normal income up to Rs. 12 lakhs will not attract any tax liability.

◈ This benefit extends up to Rs. 12.75 lakhs for salaried taxpayer considering the standard deduction of Rs. 75,000.

 ◈ In the new tax regime, the government has revised the tax structure as follows:

TDS/TCS rationalization for easing difficulties

The limit for tax deduction on interest for senior citizens doubled from the present Rs 50,000 to Rs 1 lakh.

◈ The annual limit of Rs 2.40 lakh for TDS on rent increased to Rs 6 lakh.

◈ The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) increased from Rs 7 lakh to Rs 10 lakh.

◈ The provisions of the higher TDS deduction will apply only in non-PAN cases.

◈ Decriminalization for the cases of delay of payment of TCS up to the due date of filing statement.

Key announcements in Indirect Taxation

◈   The budget has proposed to fully exempt 36 lifesaving medicines from Basics Customs Duty (BCD), 6 lifesaving medicines to attract concessional customs duty of 5%.

◈  Cobalt powder and waste, the scrap of lithium-ion battery, Lead, Zinc and 12 more critical minerals fully exempted from BCD.

◈  35 additional capital goods for EV battery manufacturing and 28 additional capital goods for mobile phone battery manufacturing exempted.

◈  Exemption of BCD on raw materials, components, consumables or parts for the manufacture of ships extended for another ten years.

THE FOLLOWING 4 PRIORITIES HAVE BEEN EMPHASIZED IN THE BUDGET:

The budget outlines a strategic approach to sustaining India’s rapid economic growth, focusing on Agriculture, MSMEs, Investment, and Exports as crucial engines for job creation, self-reliance, and enhanced global competitiveness

AGRICULTURE:

Spurring Agricultural Growth

◈ PM Dhan-Dhaanya Krishi Yojana aims to enhance productivity, promote crop diversification, improve storage, irrigation, and credit access in 100 low-productivity districts, benefiting 1.7 crore farmers.

◈ Government to launch a 6-year mission with focus on Tur, Urad, and Masoor, emphasizing climate- resilient seeds, protein enhancement, productivity, post-harvest management, and ensuring remunerative prices, with procurement support from NAFED and NCCF.

◈ The government will Establish framework for sustainable fisheries from the exclusive economic zone and high seas, with a focus on the Andaman & Nicobar and Lakshadweep Islands, to unlock the untapped potential of the marine sector and enhance seafood exports valued at Rs.60,000 crore.

◈ Plant with an annual capacity of 12.7 lakh metric tons to be established at Namrup, Assam to enhance urea production and achieve self-sufficiency, building on the reopening of three dormant plants in the Eastern region

◈ The loan limit under the Modified Interest Subvention Scheme for Kisan Credit Cards (KCC) will be increased from Rs.3 lakh to Rs.5 lakh, benefiting 7.7 crore farmers, fishermen, and dairy farmers.

MSME

Measures for Labour Intensive Sectors

◈ F or S uppor t i ng des i gn, component manufacturing, and machinery for non- leather and leather footwear, aiming to create 22 lakh jobs, Rs. 4 lakh crore turnovers, and Rs. 1.1 lakh crore exports.

◈ National Action Plan for toys will provide term loans up to Rs. 2 crore for 5 lakh first-time women, SC, and ST entrepreneurs over 5 years. ◈ A National Institute of Food Technology, Entrepreneurship, and Management will be established to boost food processing, enhance farmers’ income, and create skilling, entrepreneurship, and employment opportunities in the Eastern region.

Enhancement of credit availability

◈ Credit guarantee cover increased from Rs.5 crore to Rs.10 crore, enabling additional credit of Rs.1.5 lakh crore over the next five years for Micro and Small Enterprises.

◈ Guarantee cover rose from Rs. 10 crore to Rs. 20 crore and guarantee fee reduced to 1% for loans for 27 key sectors under Atmanirbhar Bharat.

◈ Well-established Exporters MSME are eligible for credit guarantee on term loans up to Rs.20 crore.

◈ Cus tomi z ed Credi t Car ds for Mi cro enterprises with a Rs.5 lakh limit for micro enterprises registered on Udyam portal.

◈  Term loans up to Rs. 2 crore for 5 lakh women, SC, and ST first-time entrepreneurs over five years for inclusive entrepreneurship.

Manufacturing mission

◈  Clean Tech manufacturing mission to support domestic value addition and ecosystem development for solar PV cells, EV batteries, motors, controllers, electrolyzes, wind tur bi nes , hi gh- vol tage t r ans mi s s i on equipment, and grid-scale batteries.

◈ National Manufacturing Mission to support small, medium, and large industries under “Make in India” through policy support, execution roadmaps, and a governance and monitoring framework for central ministries and states.

AIFs for Startups:

Received commitments exceeding Rs. 91,000 cr., supported by a Rs.10,000 crore Fund of Funds, with New Fund of Funds Expanded with scope & fresh contribution of Rs.10,000 crore contribution.

INVESTMENT

Support to States for Infrastructure:

◈ An outlay of Rs. 1.5 lakh crore is proposed for the 50-year interest free loans to states for capital expenditure and incentives for reforms.

◈ To incentivize electricity distribution reforms and augmentation of intra-state transmission capacity by states, an additional borrowing of 0.5% of GSDP will be allowed to states, contingent on these reforms.

Research and Development:

◈   A Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of Rs.20,000 crore will be set up.

◈  A Centre of Excellence in Artificial Intelligence for education will be set up with a total outlay of Rs.500 crore.

◈  Rs.20,000 crore allocated to implement private sector driven Research, Development and Innovation initiative.

Housing and Urban Development

◈ Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund 2 will be established as a blended finance facility with contribution from the Government, banks and private investors. This fund of Rs.15,000 crore will aim for expeditious completion of another 1 lakh units.

◈  The Government will set up an Urban Challenge Fund of Rs.1 lakh crore to implement the proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’ and ‘Water and Sanitation’.

Maritime Development Fund

◈ For long-term financing for the maritime industry, a Maritime Development Fund with a corpus of Rs.25,000 crore will be set up. This will have up to 49% contribution by the Government, and the balance will be mobilized from ports and private sector.

Asset Monetization Plan

◈ Building on the success of the first Asset Monetization Plan announced in 2021, the second Plan for 2025-30 will be launched to plough back capital of Rs. 10 lakh crore in new projects.

EXPORT

Export Promotion Mission

◈ To facilitate easy access to export credit, cross- border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets.

National Framework for GCC

◈ A national framework will be formulated as guidance to states for promoting Global Capability Centres in emerging tier 2 cities.

BharatTradeNet

◈ A digital public infrastructure, ‘Bharat TradeNet’ (BTN) for international trade will be set- up as a unified platform for trade documentation and financing solutions.

◈ Support for integration with Global Supply Chains

◈ To develop domestic manufacturing capacities for our economy’s integration with global supply chains. Government will support the domestic electronic equipment industry to leverage this opportunity for the benefit of the youth.

Warehousing facility for air cargo

◈ Government will facilitate upgradation of infrastructure and warehousing for air cargo including high value perishable horticulture produce. Cargo screening and customs protocols will be streamlined and made user- friendly.

OTHER KEY FINANCIAL SECTOR REFORMS AND DEVELOPMENT

FDI in Insurance Sector

◈  The FDI limit for the insurance sector will be raised from 74 to 100%. This enhanced limit will be available for those companies which invest the entire premium in India.

Credit Enhancement Facility by NaBFID

◈ NaBFID will set up a ‘Partial Credit Enhan- cement Facility’ for corporate bonds for infrastructure.

Grameen Credit Score

◈  Public Sector Banks will develop ‘Grameen Credit Score’ framework to serve the credit needs of SHG members and people in rural areas.

Pension Sector

◈  A forum for regulatory coordination and development of pension products will be set up.

KYC Simplification

◈  Simplifying the KYC process and revamped Central KYC Registry in 2025

FSDC Mechanism

◈  Under the Financial Stability and Development Council (FSDC), a mechanism will be set up to evaluate impact of the current financial regulations and subsidiary instructions.

Investment Friendliness Index of States

◈  An Investment Friendliness Index of States will be launched in 2025 to further the spirit of competitive cooperative federalism.

KEY TAKE AWAYS FROM THE BUDGET:

Fiscal Discipline has been maintained

The government achieved its glide path of 4.5% of GDP for FY26 mentioned in the previous budget. In fact, it exceeded expectations by targeting fiscal deficit at 4.4% for FY26 and 4.8% for FY25 (against the earlier estimate of 4.9%). This creates the path for further fi scal consolidation going forward and a possibility of targeting 3% of GDP subject to favourable macr os . F r om the mar k et perspective, bonds could find more favour from the long term perspective.

Renewed Focus on Consumption

This government’s earlier budgets were seen to lack focus on consumption and the recent fall in demand have probably nudged it to take proactive steps towards demand creation. Accordingly, the budget has provided a major concession towards individuals through reduction in income tax rates. The revenue foregone has been a whopping 1 lakh crores and will help demand side of the economy.

Collaborative approach with States and Private entities for the public projects:

The budget has emphasised on the collaborative approach with S t a t e s o n f e w a r e a s l i k e development of agri district programs and Rural prosperity and resilience program. The budget has also nudged states towards power reforms by allowing borrowings of 0.5% of GSDP towards power sector reforms. Additionally the budget has encouraged infra related ministries to come up with three year pipeline of projects that can be implemented under public private partnership. This could have a multiplier effect on the economy.

Maintaining the Capex levels

Though the focus this year is on consumption, the capex is maintained at respectable 11.21 lakh crores. Unlike in FY25, where significant capex was curtailed due to elections related restriction, this year we can expect full utilisation of the amount thereby boosting the economic output.

Cognizant of new age requirements

The budget is mindful of the requirement of the times such as the  changing  dynamics  and r equi r ements for Ar t i fi ci al intelligence, Startup funding, Research & Development and Boosting Alternative Energy such as nuclear power etc. This b u d g e t h a s a d e q u a t e l y allocated for the probable futuristic needs.

Continuation of the Social sector schemes

The Social welfare schemes that has been the hallmark of the current regime have been continued with and have been given the boost in some areas. The allocation towards these schemes continues to remain robust.

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