Union Budget 2025

The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, aims to address India’s economic challenges while promoting growth and inclusivity. The budget outlines reforms across various sectors, including agriculture, MSMEs, investments, and exports. The government emphasises the need for transformative reforms in taxation, urban development, and the financial sector.

Agricultural Reforms

• A National Mission on High Yielding Seeds will enhance research and seed production.
• The establishment of a Makhana Board in Bihar aims to support local farmers and increase production.
• The Prime Minister Dhan Dhanya Krishi Yojana (PMDDKY) will target 100 districts to improve agricultural productivity.
• A focus on self-sufficiency in pulses and a new Mission for Cotton Productivity will further support farmers.

Support for MSMEs

• To enhance the efficiency of Micro, Small, and Medium Enterprises (MSMEs), the budget raises investment limits and expands credit guarantees.
• The introduction of customised credit cards will facilitate access to finance for micro-enterprises.
• A new Fund of Funds for startups will encourage innovation and entrepreneurship, while the National Manufacturing Mission will support manufacturing across various sectors.

Investment Initiatives

• The budget extends the Jal Jeevan Mission until 2028 to ensure water supply coverage.
• A ₹1 lakh crore Urban Challenge Fund aims to stimulate urban development projects.
• Significant allocations are made for infrastructure, including the development of greenfield airports in Bihar.
• The government also plans to enhance health infrastructure with a Nuclear Energy Mission for Small Modular Reactors.

Export Promotion

• An Export Promotion Mission will improve access to credit for MSMEs in global markets.
• The BharatTradeNet initiative aims to streamline international trade documentation.
• The budget also focuses on integrating India into global supply chains, particularly in Industry 4.0 sectors.

Tax Reforms and Fiscal Discipline

• Major tax reforms include raising the income tax rebate limit to ₹12 lakh, benefiting the middle class .
• The fiscal deficit is projected to decrease to 4.4% of GDP, despite the revenue foregone due to tax cuts.
• The budget maintains a commitment to fiscal discipline while aiming to boost consumer spending.

Focus on Employment and Skill Development

• The budget prioritises job creation through investments in labour-intensive sectors. Skill development programmes will be expanded, particularly in hospitality and tourism.
• The government aims to create a vibrant ecosystem for employment generation, especially for women and marginalised communities.

Gender Budget and Social Welfare

The Gender Budget allocation has increased to ₹4.49 lakh crore, reflecting a commitment to women’s empowerment. Various ministries have included gender-focused allocations, enhancing support for women and children across sectors.

Climate and Sustainability Initiatives

The budget includes measures for sustainable development, such as promoting renewable energy and enhancing infrastructure for green technologies. However, experts note a lack of comprehensive climate adaptation strategies, which remain critical for vulnerable communities.

Questions for UPSC:

1. Critically analyse the impact of the Union Budget 2025 on the agricultural sector’s growth trajectory.
2. Estimate the implications of raising the income tax rebate limit to ₹12 lakh on consumer spending and economic growth.
3. What are the potential effects of the Export Promotion Mission on India’s integration into global supply chains?
4. Point out the major challenges faced by MSMEs in accessing credit and how the budget addresses these issues.

Answer Hints:

1. Critically analyse the impact of the Union Budget 2025 on the agricultural sector’s growth trajectory.

1. The establishment of a National Mission on High Yielding Seeds aims to enhance agricultural productivity through improved seed research and production.
2. The creation of a Makhana Board in Bihar will support local farmers, focusing on production, processing, and marketing of Makhana, which is crucial for the state’s economy.
3. Introduction of the Prime Minister Dhan Dhanya Krishi Yojana (PMDDKY) targets 100 districts to improve agricultural practices and outcomes.
4. Focus on self-sufficiency in pulses and a specific Mission for Cotton Productivity will directly benefit farmers and boost production.
5. Overall, these initiatives indicate a shift towards enhancing rural livelihoods and agricultural sustainability, aiming for long-term growth in the sector.

2. Estimate the implications of raising the income tax rebate limit to ₹12 lakh on consumer spending and economic growth.

1. Raising the rebate limit means individuals earning up to ₹12 lakh will have zero tax liability, increasing disposable income for middle-class taxpayers.
2. This additional income is expected to lead to increased consumer spending, stimulating demand for goods and services.
3. Higher consumer spending can incentivize businesses to invest in new capacities, potentially leading to job creation.
4. The government anticipates that this will kick-start economic growth, countering the slowdown experienced in recent years.
5. However, the effectiveness of this measure relies on consumer confidence and willingness to spend, which may vary based on overall economic conditions.

3. What are the potential effects of the Export Promotion Mission on India’s integration into global supply chains?

1. The Export Promotion Mission aims to enhance access to credit for MSMEs, enabling them to compete effectively in global markets.
2. By developing a unified digital platform for international trade documentation, the mission simplifies processes for exporters.
3. Support for domestic manufacturing will facilitate integration into global supply chains, particularly in Industry 4.0 sectors.
4. The focus on skill development and improving air cargo infrastructure will enhance India’s export capabilities.
5. Overall, the mission is likely to strengthen India’s position in global trade and improve the competitiveness of Indian goods and services.

4. Point out the major challenges faced by MSMEs in accessing credit and how the budget addresses these issues.

1. MSMEs often face challenges such as high collateral requirements and limited access to formal credit channels, hindering their growth.
2. The budget enhances investment and turnover limits for MSMEs, allowing for better classification and access to funding.
3. Credit guarantee cover is increased, providing additional security for lenders and encouraging them to extend loans to MSMEs.
4. Customised credit cards for micro-enterprises will facilitate easier access to finance, addressing immediate liquidity needs.
5. Overall, these measures aim to create a more supportive financial ecosystem for MSMEs, boosting their growth potential.