Union Budget 2025
The Union Budget, formally recognized as the Annual Financial Statement under Article 112 of the Indian Constitution, presents the government’s estimated income and expenditure for a financial year. While the Constitution does not explicitly use the term “budget,” it provides a legal framework for financial planning.
Who Prepares the Budget? The Department of Economic Affairs (DEA), which operates under the Ministry of Finance, is responsible for drafting the Union Budget.
History of Budget :
- The first Indian budget was introduced by James Wilson on April 7, 1860, during British rule.
- After Independence, The 1947-48 interim budget was presented by Liaquat Ali Khan as part of the interim government.
- The first independent budget of India was delivered by R.K. Shanmukham Chetty on November 26, 1947.
Budget Process in India
The Union Budget follows a structured process:
- The Finance Minister presents the budget in Parliament.
- A general discussion takes place in both Houses.
- Standing Committees review the financial demands of various ministries.
- The Lok Sabha debates and votes on the Demands for Grants.
- The Appropriation and Finance Bills are passed, finalizing budgetary allocations and taxation changes.
Types of Budget
- Revenue Budget: Includes earnings from tax and non-tax sources and government expenses related to administration and services.
- Capital Budget: Deals with capital receipts and expenditures, covering loans, investments, and asset creation.
Components of the Budget: The budget is divided into two main parts:
- Part A – Covers economic policies, government schemes, and resource distribution across various sectors.
- Part B – Focuses on taxation, income tax revisions, and changes in indirect taxes.
Key Budget Documents
Along with the Finance Minister’s speech, the following documents are presented in Parliament:
- Annual Financial Statement (Article 112)
- Demands for Grants (Article 113)
- Finance Bill (Article 110)
Fiscal Policy Statements (as per the FRBM Act 2003), includes:
- Macro-Economic Framework Statement
- Medium-Term Fiscal Policy and Fiscal Strategy Statement
Theme of the Budget: The Union Budget 2025-26 is designed around the theme of “Sabka Vikas”, which emphasizes inclusive development across various sectors.
Financial Estimates and Revenue Trends: The budget presents estimates for revenue and capital receipts, highlighting growth trends compared to previous years.
Deficit Trend
| Expenditure Breakdown by Key Sectors | |
| Major Items | Expenditure (in ₹ Crore) |
| Defence | 4,91,732 |
| Rural Development | 2,66,817 |
| Home Affairs | 2,33,211 |
| Agriculture and Allied Activities | 1,71,437 |
| Education | 1,28,650 |
| Health | 98,311 |
| Urban Development | 96,777 |
| IT and Telecom | 95,298 |
| Energy | 81,174 |
| Commerce & Industry | 65,553 |
| Social Welfare | 60,052 |
| Scientific Departments | 55,679 |
Revenue and Expenditure Sources
Broad Development Vision and Goals: The budget emphasizes “Viksit Bharat”, focusing on key development principles such as:
- Eradicating poverty and ensuring economic inclusion for all.
- Universal access to quality education and skill development.
- Improved healthcare facilities, making medical services accessible and affordable.
- Strengthening employment opportunities by enhancing workforce skills.
- Promoting women’s participation in economic activities.
- Enhancing agricultural productivity to establish India as the “food basket of the world.”
Core Development Focus Areas
The budget highlights the four key pillars of development:
- Garib (Poor) – Social security and welfare measures.
- Yuva (Youth) – Employment generation and skill development.
- Annadata (Farmers) – Agricultural growth and support.
- Nari (Women) – Empowerment and financial inclusion.
4 Engines of Development
First Engine of Development: Agriculture
- The government has launched multiple programs to enhance agricultural efficiency, improve irrigation, boost credit availability, and strengthen rural economies.
1. Prime Minister Dhan-Dhaanya Krishi Yojana
This initiative is inspired by the Aspirational Districts Programme, aiming to develop 100 agricultural districts with:
- Low productivity,
- Moderate crop intensity,
- Below-average access to credit.
Objectives:
- Enhance agricultural productivity through better techniques.
- Improve irrigation facilities to increase crop yields.
- Provide short-term and long-term credit for farmers.
- Develop post-harvest storage infrastructure at panchayat and block levels.
- Encourage crop diversification and sustainable farming practices.
- Support 1.7 crore farmers with targeted interventions.
2. Multi-Sectoral ‘Rural Prosperity and Resilience’ Programme
Partnership: This program will be implemented in collaboration with state governments.
Goal: Reduce under-employment in agriculture by integrating:
- Skill development,
- Investment opportunities,
- Technological advancements,
- Financial aid to rural entrepreneurs.
Coverage: In the first phase, 100 agricultural districts will be covered.
Target Groups:
- Rural women
- Young farmers
- Rural youth
- Marginal and small farmers
- Landless agricultural workers.
Outcome: The initiative aims to increase rural employment opportunities, reducing migration pressure on urban areas.
3. Mission for Aatmanirbharta (Self-Reliance) in Pulses
- Duration: 6 years.
- Target Crops: Focus on increasing the production of Tur, Urad, and Masoor pulses.
- Procurement Policy: Unlimited procurement by government agencies (NAFED and NCCF) for the next four years.
- Farmers must register and enter formal agreements to avail benefits.
Objectives:
- Increase pulse production and reduce dependence on imports.
- Develop climate-resilient seeds.
- Enhance protein content and nutritional value of pulses.
- Improve post-harvest storage facilities to reduce wastage.
4. Mission for Cotton Productivity
Duration: 5 years.
Objective: Increase cotton yield and sustainability through better farming practices.
Focus: Promote extra-long staple (ELS) cotton varieties for global competitiveness.
Alignment with ‘5F Vision’ for the Textile Sector:
- Farm to Fibre,
- Fibre to Factory,
- Factory to Fashion,
- Fashion to Foreign (export markets).
Impact: Ensures a steady supply of high-quality cotton, revitalizing India’s traditional textile sector.
5. Fisheries Development: Harnessing the Blue Economy
The government aims to unlock marine resources and increase fisheries productivity, particularly in Andaman & Nicobar and Lakshadweep Islands.
Key Facts:
- India is the second-largest producer of fish and aquaculture worldwide.
- Seafood exports generate ₹60,000 crore annually.
Framework for Fisheries Development:
- Expand fishing zones and improve marine biodiversity conservation.
- Introduce advanced deep-sea fishing technology.
- Enhance cold storage and processing facilities for better supply chain management.
6. Comprehensive Programme for Vegetables & FruitsImplementation: In partnership with state governments.
Objective:
- Promote fruit and vegetable cultivation, ensuring:
- Efficient supply chains,
- Processing facilities,
- Better pricing for farmers.
7. National Mission on High-Yielding Seeds
This initiative focuses on strengthening India’s seed research ecosystem.
Goals:
- Develop and propagate high-yield, pest-resistant, and climate-resilient seeds.
- Ensure commercial availability of 100+ new seed varieties released since July 2024.
8. Makhana Board in Bihar
- Purpose: Boost the production, processing, and market value of Makhana.
- Support: Farmers and local cooperatives will be organized into Farmer Producer Organizations (FPOs).
9. Expansion of Credit Facilities for Farmers
Kisan Credit Card (KCC) Loan Limit Increase:
- Previous Limit: ₹3 lakh.
- New Limit: ₹5 lakh.
- Coverage: 7.7 crore farmers, fishermen, and dairy farmers will benefit.
10. Establishment of a Urea Plant in Assam
- Location: Namrup, Assam.
- Significance: Supports self-sufficiency in fertilizer production.
- Additional Urea Plants Revived Across India:
- Sindri (Jharkhand)
- Barauni (Bihar)
- Gorakhpur (U.P.)
- Ramagundam (Telangana)
- Talcher (Odisha)
11. India Post & India Post Payments Bank (IPPB) in Rural Development: IPPB will serve as a logistics and banking network for:
- Rural businesses
- Micro, Small, and Medium Enterprises (MSMEs)
- Women entrepreneurs
- Self-Help Groups (SHGs).
Impact: Strengthens financial inclusion in rural India.
Second Engine of Development: MSMEs (Micro, Small, and Medium Enterprises)
The MSME sector is a major contributor to employment and industrial output. To strengthen this sector, the government has introduced several reforms, financial incentives, and policy support.
1. Revision in MSME Classification
Investment and turnover thresholds for Micro, Small, and Medium Enterprises (MSMEs) have been increased, allowing more businesses to benefit from MSME schemes.
| Revision in classification criteria for MSMEs | ||||
| ₹ in Crore | Investment | Turnover | ||
| Current | Revised | Current | Revised | |
| Micro Enterprises | 1 | 2.5 | 5 | 10 |
| Small Enterprises | 10 | 25 | 50 | 100 |
| Medium Enterprises | 50 | 125 | 250 | 500 |
2. Credit Enhancement for MSMEs: Increased Credit Guarantee Cover:
- Previous limit: ₹5 crore
- Revised limit: ₹10 crore
- Term Loan Support: Increased credit availability for MSMEs and startups up to ₹20 crore.
Customized Credit Cards for Micro Enterprises:
- ₹5 lakh credit limit for micro-enterprises registered on the Udyam portal.
- Target: 10 lakh cards issued in the first year
3. National Manufacturing Mission – Strengthening ‘Make in India’
Objective:
- Improve ease of doing business.
- Reduce production costs.
- Support future-ready workforce for emerging industries.
Focus Sectors:
- Clean technology manufacturing (Solar PV cells, EV batteries, wind turbines).
- Electric mobility and renewable energy components.
- Advanced industrial equipment and automation technologies.
Implementation:
- Governance reforms to support MSMEs.
- Financial aid and tax incentives.
4. Support for Labour-Intensive Sectors
- Footwear & Leather Industry: Increased funding for design, component manufacturing, and machinery.
- Employment generation target: 22 lakh jobs
- Expected turnover: ₹4 lakh crore.
- Projected exports: ₹1.1 lakh crore.
- Toy Manufacturing Initiative: Supports cluster-based production for high-quality, sustainable toys.
- Aligned with the National Action Plan for Toys to boost domestic toy production.
- Food Processing Industry: Establishment of the National Institute of Food Technology, Entrepreneurship, and Management (NIFTEM) in Bihar.
- Aims to enhance farmers’ income and promote rural entrepreneurship.
5. Scheme for First-Time Entrepreneurs
- Target: 5 lakh new entrepreneurs, including women, Scheduled Castes (SC), and Scheduled Tribes (ST).
- Loan Support: Up to ₹2 crore per entrepreneur over five years.
6. Fund of Funds for Startups: ₹10,000 crore allocated to promote
startup ecosystems and deep-tech innovation.
Third Engine of Development: Investment in People, Economy, and Innovation
The government is focusing on investment in human capital, infrastructure, and research to build a strong foundation for future economic growth.
Investment in People
- Education and Skill Development
- Saksham Anganwadi and Poshan 2.0: Provides support to 8 crore children, 1 crore pregnant/lactating women, and 20 lakh adolescent girls.
- Atal Tinkering Labs: 50,000 labs will be set up in government schools in the next five years.
- Bharatiya Bhasha Pustak Scheme: Digital Indian language books for schools and higher education.
- National Centres of Excellence (CoEs) for Skilling: Five Centres will be set up to train workers for Make in India and global markets.
- Expansion of IITs: Infrastructure expansion in five Indian Institutes of Technology (IITs).
- Centre of Excellence (CoE) in AI: ₹500 crore allocated for AI research in education.
B. Healthcare Development
- Expansion of Medical Education: 10,000 additional medical seats will be added in colleges and hospitals.
- Day Care Cancer Centres: 200 cancer treatment centres to be established in district hospitals.
C. Social Security for Gig Workers: Identity cards, healthcare benefits, and e-Shram registration for 1 crore gig workers.
D. Strengthening Urban Livelihoods
- Revamping PM SVANidhi Scheme: Higher loan limits and digital UPI-linked credit cards with a ₹30,000 limit for street vendors.
- New Urban Upliftment Scheme: Aims to improve living standards and incomes of urban informal workers.
2. Investment in Economy
Investing in people, economy and innovation:
- Support to States for Infrastructure: With an outlay of ₹ 1.5 lakh crore, this initiative provides 50-year interest free loans to states for capital expenditure and includes incentives for reforms.
- Jal Jeevan Mission: Aimed at achieving 100% coverage, the mission has been extended till 2028 with an enhanced total outlay to ensure comprehensive water access.
- Power Sector Reforms: This includes incentivizing distribution reforms and augmentation of intra-state transmission, with additional borrowing of 0.5% of GSDP available to states, contingent on implementing these reforms.
- Asset Monetization Plan 2025-30: The plan has been launched to plough back capital of ₹ 1 lakh crore in new projects, focusing on maximizing the value of government assets.
- Urban Challenge Fund: A fund of ₹ 1 lakh crore has been allocated to implement proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’, and ‘Water & Sanitation’ initiatives.
- Maritime Development Fund: Established with a corpus of ₹25,000 crore for long-term financing, featuring up to 49% contribution by the government to strengthen maritime infrastructure.
- Nuclear Energy Mission for Viksit Bharat: Focuses on amendments to the Atomic Energy Act and Civil Liability for Nuclear Damage Act, aiming to facilitate active partnership with the private sector.
- UDAN: This initiative aims to enhance regional connectivity by adding 120 new destinations and plans to carry 4 crore passengers in the next 10 years.
- Future needs of Bihar: The plan includes providing financial support specifically for the Western Koshi Canal ERM Projects to enhance infrastructure in Bihar.
- SWAMIH Fund-2: Allocates ₹15,000 crore for expeditious completion of one lakh dwelling units through blended finance, addressing housing sector needs.
Tourism for employment-led growth:
- Top 50 tourist destination sites will be developed in partnership with states to enhance tourism infrastructure and attract visitors.
- Introducing streamlined e-visa facilities to make the visa application process more efficient and tourist-friendly.
- Intensive skill-development programmes for our youth focused on tourism-related skills and services to create employment opportunities.
- Performance-linked incentives will be provided to states that excel in tourism development and promotion.
- MUDRA loans for homestays will be made available to support local entrepreneurs in developing tourist accommodations.
- Ease of travel and connectivity to tourist destinations will be improved to make tourist spots more accessible.
These initiatives form a comprehensive strategy to boost tourism while creating employment opportunities and supporting local economic growth.
Investment in Innovation:
- PM Research Fellowship: To provide ten thousand fellowships for technological research in IITs and IISc.
- Research, Development & Innovation: Allocating ₹20,000 crore to implement private sector driven Research, Development and Innovation initiative.
- Gene Bank for Crops Germplasm: The 2nd Gene Bank with 10 lakh germplasm lines to be set up for future food and nutritional security.
- Gyan Bharatam Mission: Documentation and conservation of our manuscript heritage to cover more than 1 crore manuscripts. National Digital Repository of Indian knowledge systems for knowledge sharing to be set up.
- National Geospatial Mission: To develop foundational geospatial infrastructure and data. Using PM Gati Shakti, facilitation of modernization of land records, urban planning, and design of infrastructure projects.
Promoting Exports:
- Export Promotion Mission: With sectoral and ministerial targets to facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets.
- Bharat Trade Net (BTN): A digital public infrastructure that will serve as a unified platform for trade documentation and financing solutions. It will also provide support for integration with Global Supply Chains.
- National Framework for GCC: Created as guidance to states for promoting Global Capability Centres in emerging tier 2 cities.
- Warehousing facility for air cargo: To facilitate upgradation of infrastructure and warehousing for air cargo, with a special focus on high value perishable horticulture produce.
These initiatives are designed to strengthen India’s export infrastructure, digitize trade processes, and enhance global trade capabilities.
Reforms as the fuel:
- Financial Sector Reforms
- Grameen Credit Score Framework: A new framework designed to serve the credit needs of Self Help Group (SHG) members and people in rural areas.
- NaBFID Initiative: Plans to set up a ‘Partial Credit Enhancement Facility’ specifically for corporate bonds related to infrastructure.
- KYC Registry Update: A revamped Central KYC registry is scheduled to be rolled out in 2025.
- Company Merger Process: Rationalization of requirements and procedures to enable speedy approval of company mergers.
- Insurance Sector FDI: The Foreign Direct Investment limit for the insurance sector will be increased from 74 to 100 percent.
Tax Reform:
- Tax Reforms: Changes in direct taxes and proposal to introduce the New Income Tax Bill
- Regulatory Reforms: Light-touch regulatory framework based on principles and trust to unleash productivity and employment
Key Initiatives:
- High Level Committee for Regulatory Reforms: Established to oversee regulatory reform implementation.
- Investment Friendliness Index of States: A metric to measure and compare investment climate across states.
- FSDC Mechanism: Designed to evaluate impact of the current financial regulations and subsidiary instructions along with a framework to enhance their responsiveness and development of the financial sector.
- Jan Vishwas Bill 2.0: Aims to decriminalize more than 100 provisions in various laws.
These reforms are designed to simplify the tax structure, ease regulatory burden, improve investment climate, and modernize the financial sector while promoting trust-based governance.
Indirect Tax proposals:
Rationalisation of Customs Tariff Structure for Industrial Goods:
- Removal of 07 tariff rates
- Apply not more than one cess or surcharge
- Apply equivalent cess to maintain effective duty incidence on most items and lower cess on certain items
Sector specific proposals:
- Make in India: Exemption to open cell for LED/LCD TV, looms for textiles, capital goods for lithium ion battery for mobile phones and EVs
- Promotion of MRO:
- Exemption for 10 years on goods for ship building and ships for breaking
- Extension of time limit for export of railway goods imported for repairs
- Export promotion: Duty free inputs for handicraft and leather sectors
- Trade Facilitation:
- Time limit fixed for finalisation of provisional assessment
- New provision for voluntary declaration of material facts post clearance
- Duty payment with interest but without penalty
- IGCR Rules amended to extend time limit to 1 year and file quarterly statement instead of monthly
Improved access to lifesaving medicines:
Addition of:
- 36 lifesaving drugs/medicines in exempted list
- 6 medicines in 5% duty list
- 37 medicines and 13 new patient assistance programmes in exempt list (Specifically for rare diseases, cancer, severe chronic diseases)
Direct Tax proposals:
Revised Tax Slabs Under the New Tax Regime:
| Tax Rate | Nil | 5% | 10% | 15% | 20% | 25% | 30% |
| Income Range (₹) | 0-4L | 4-8L | 8-12L | 12-16L | 16-20L | 20-24L | Above 24L |
- Ease of doing business:
- Introduction of scheme for determining length price of international transaction for a block period of three years
- Expansion of scope of safe harbour rules to reduce litigation and provide certainty in international taxation
- Rationalization of TDS/TCS for easing difficulties:
- Tax deduction limit for senior citizens doubled from ₹50,000 to ₹1 lakh
- The annual limit of ₹2.40 lakh for TDS on rent increased to ₹6 lakh
- Encouraging voluntary compliance: Extension of time-limit to file updated returns from two years to four years
- Reducing compliance burden:
- Reduced compliance for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years
- Tax payers allowed to claim annual value of 02 self occupied properties (previously 01) without any conditions
- Employment and Investment:
- Tax certainty for electronics manufacturing schemes
- Tonnage Tax Scheme for Inland Vessels
- Extension for incorporation by 5 years of Start-Ups
- Specific benefits to ship-leasing units, insurance offices and treasury centres of global companies set up in IFSC
- Certainty of taxation to Category I and category II AIFs, undertaking investments in infrastructure and other such sectors, on the gains from securities