Context: Quoting Telugu poet and playwright Shri Gurajada Appa Rao’s famous saying, ‘A country is not just its soil; a country is its people.’ – the Finance Minister presented the Union Budget 2025-26 with the theme “Sabka Vikas” stimulating balanced growth of all regions.

In line with this theme, the Finance Minister outlined the broad Principles of Viksit Bharat to encompass the following:

• a) Zero-poverty;

• b) Hundred per cent good quality school education;

• c) Access to high-quality, affordable, and comprehensive healthcare;

• d) Hundred per cent skilled labour with meaningful employment;

• e) Seventy per cent women in economic activities; and

• f) Farmers making our country the ‘food basket of the world’.

• The Union Budget 2025-2026 promises to continue Government’s efforts to accelerate growth, secure inclusive development, invigorate private sector investments, uplift household sentiments, and enhance spending power of India’s rising middle class. The Budget proposes development measures focusing on poor (Garib), Youth, farmer (Annadata) and women (Nari).

• The Budget aims to initiate transformative reforms in Taxation, Power Sector, Urban Development, Mining, Financial Sector, and Regulatory Reforms to augment India’s growth potential and global competitiveness.

• Union Budget highlights that Agriculture, MSME, Investment, and Exports are engines in the journey to Viksit Bharat using reforms as fuel, guided by the spirit of inclusivity.

1. Agriculture as the 1st Engine of development

• Prime Minister’s Dhan-Dhaanya Krishi Yojana – Agri-District Development Program- This initiative, to be launched in collaboration with state governments, will cover 100 districts with low productivity, moderate crop intensity, and subpar credit parameters. It aims to benefit 1.7 crore farmers.

• Building Rural Prosperity and Resilience- A holistic, multi-sectoral program will be rolled out with state cooperation to tackle underemployment in agriculture. This will include skilling, investment, technology, and efforts to stimulate the rural economy. The first phase will target 100 emerging agricultural districts.

• Aatmanirbharta in Pulses- The government will initiate a 6-year “Mission for Aatmanirbharta in Pulses,” focusing on Tur, Urad, and Masoor. NAFED and NCCF will purchase these pulses from farmers over the next 4 years.

• Makhana Board in Bihar- A dedicated Makhana Board will be established to boost the production, processing, value addition, and marketing of Makhana in Bihar.

• National Mission on High Yielding Seeds- A National Mission will focus on strengthening the research ecosystem, developing and propagating high-yield seeds, and ensuring the availability of over 100 seed varieties for commercial use.

• Fisheries- The government will establish a framework for the sustainable exploitation of fisheries within India’s Exclusive Economic Zone and the High Seas, with special emphasis on the Andaman & Nicobar and Lakshadweep Islands.

• Mission for Cotton Productivity- A 5-year mission will be launched to enhance cotton farming productivity, sustainability, and promote the cultivation of extra-long staple cotton varieties.

• Enhanced Credit through KCC- The loan limit under the Modified Interest Subvention Scheme will be raised from Rs. 3 lakh to Rs. 5 lakh for loans accessed through the Kisan Credit Card (KCC).

• Urea Plant in Assam- A new urea plant with an annual production capacity of 12.7 lakh metric tons will be established at Namrup, Assam.

2. MSMEs as the 2nd Engine of development

• Revised Classification Criteria for MSMEs- The investment and turnover limits for MSME classification will be increased by 2.5 times and 2 times, respectively.

• Credit Cards for Micro Enterprises- Customized Credit Cards with a Rs. 5 lakh limit will be introduced for micro enterprises registered on the Udyam portal. A total of 10 lakh cards will be issued in the first year.

• Fund of Funds for Startups- A new Fund of Funds with an expanded scope will be established, backed by a fresh Rs.10,000 crore contribution.

• Scheme for First-Time Entrepreneurs- A new initiative will support 5 lakh first-time entrepreneurs from women, Scheduled Castes, and Scheduled Tribes. Term loans of up to Rs. 2 crore will be provided over the next five years.

• Focus Product Scheme for Footwear & Leather Sectors- To boost productivity, quality, and competitiveness in India’s footwear and leather sector, a targeted scheme has been introduced. This initiative aims to generate employment for 22 lakh people, achieve a turnover of Rs. 4 lakh crore, and drive exports exceeding Rs. 1.1 lakh crore.

• Support for the Toy Industry- A new scheme will promote the creation of high-quality, innovative, and sustainable toys, positioning India as a global hub for toy manufacturing.

• Boost to Food Processing- A National Institute of Food Technology, Entrepreneurship, and Management will be established in Bihar to support food processing enterprises.

• National Manufacturing Mission – Advancing “Make in India”- A National Manufacturing Mission will be launched to boost the “Make in India” initiative, covering small, medium, and large industries. It will also promote Clean Tech manufacturing and strengthen domestic production of solar PV cells, EV batteries, motors, controllers, electrolyzers, wind turbines, high-voltage transmission equipment, and grid-scale batteries.

3. Investment as the 3rd Engine of development

• Saksham Anganwadi and Poshan 2.0- Nutritional support cost norms to be suitably enhanced.

• Atal Tinkering Labs- 50,000 Atal Tinkering Labs to be established in government schools over the next five years.

• Broadband Connectivity for Schools & Health Centers- Under the BharatNet project, all government secondary schools and primary health centers in rural areas will receive broadband connectivity.

• Bharatiya Bhasha Pustak Scheme- A new scheme introduced to provide Indian language books in digital format for school and higher education.

• National Centres of Excellence for Skilling- Five National Centres of Excellence for skilling to be set up in collaboration with global experts to equip youth for “Make for India, Make for the World” manufacturing.

• Expansion of IIT Infrastructure- Additional infrastructure will be developed in the five IITs established after 2014, enabling education for 6,500 more students.

• Centre of Excellence in AI for Education- A dedicated Centre of Excellence for Artificial Intelligence in education to be established with a total budget of Rs. 500 crore.

• Expansion of Medical Education- An additional 10,000 medical seats will be created in medical colleges and hospitals next year, reaching a total of 75,000 seats over five years.

• Day Care Cancer Centres- Day Care Cancer Centres to be set up in all district hospitals within three years, with 200 centers operational by 2025-26.

• Strengthening Urban Livelihoods- A new scheme introduced to support the socio-economic upliftment of urban workers, improving their incomes and ensuring sustainable livelihoods.

• PM SVANidhi- The scheme will be revamped with enhanced loan facilities, UPI-linked credit cards with a Rs. 30,000 limit, and capacity-building support.

• Social Security for Gig Workers- Online platform workers to receive identity cards, registration on the e-Shram portal, and healthcare benefits under the PM Jan Arogya Yojana.

4. Exports as the 4th engine of development

• Export Promotion Mission- An Export Promotion Mission will be established with sector-specific and ministerial targets, jointly led by the Ministries of Commerce, MSME, and Finance.

• BharatTradeNet (BTN)- A unified platform, ‘BharatTradeNet’ (BTN), will be developed to streamline international trade, offering seamless trade documentation and financing solutions.

• National Framework for Global Capability Centres (GCCs)- A national framework will be introduced to guide states in fostering Global Capability Centres, particularly in emerging tier-2 cities.

• Reforms as fuel: financial sector reforms and development

• FDI in Insurance Sector- The FDI limit in the insurance sector will be increased from 74% to 100% for companies that reinvest the entire premium within India.

• Grameen Credit Score- Public Sector Banks will develop a ‘Grameen Credit Score’ framework to address the credit needs of Self-Help Group (SHG) members and rural populations.

• Pension Sector Reforms- A dedicated forum will be set up for regulatory coordination and the development of innovative pension products.

• Investment Friendliness Index of States- An Investment Friendliness Index will be introduced in 2025 to promote competitive cooperative federalism.

• Jan Vishwas Bill 2.0- The Jan Vishwas Bill 2.0 will decriminalize over 100 provisions across various laws to enhance ease of doing business.

Understanding Key terminology of Budget

• Revenue Receipts: Government income from taxes, fines, and services, without affecting assets or liabilities.

• Capital Receipts: Funds received from selling government assets or borrowing, impacting assets or liabilities.

• Revenue Expenditure: Regular government spending like salaries and subsidies, with no asset creation.

• Capital Expenditure: Spending on infrastructure and long-term assets, leading to economic growth.

• Deficit Budget: When expenditure exceeds income, leading to borrowing or fiscal imbalance.

• Surplus Budget: When income surpasses expenditure, creating excess funds.

• Direct Taxes: Taxes like income tax, paid directly by individuals or entities.

• Indirect Taxes: Taxes like GST, passed on from consumers to businesses and then to the government.

• Disinvestment: Selling PSUs or government stakes to generate capital receipts.

• Borrowing: Government loans that create a liability to repay in the future.

• Recovery of Loans: When the government recovers money from past loans, reducing assets but receiving funds.

Where the money comes from

• For every rupee in the government coffer, the biggest pie of 66 paise will come from direct and indirect taxes, according to the Union Budget 2025-26 documents. Around 24 paise will come from borrowings and other liabilities, 9 paise from non-tax revenue like disinvestment, and 1 paise from non-debt capital receipts, the Budget documents said.

• Direct taxes, including corporate and individual income tax will contribute around 39 paise, while income tax will yield 22 paise, while corporate tax will account for 17 paise. Among indirect taxes, goods and services tax (GST) will contribute the maximum 18 paise in every rupee of revenue. Besides, the government is looking to earn 5 paise out of every rupee from excise duty and 4 paise from customs levy.

Where the money goes to

• On the expenditure side, the outlay for interest payments and states’ share of taxes and duties, respectively, stood at 20 paise and 22 paise for every rupee. Allocation for defence stands at 8 paise per rupee. Expenditure on central sector schemes will be 16 paise out of every rupee, while the allocation for centrally-sponsored schemes is 8 paise. The expenditure on ‘Finance Commission and other transfers’ is pegged at 8 paise. Subsidies and pension will account for 6 paise and 4 paise, respectively. The government will spend 8 paise out of every rupee on ‘other expenditures’.

Budget Estimates 2025-26

• For FY 2025-26, the Union Finance Minister stated that the total receipts other than borrowings and the total expenditure are estimated at Rs 34.96 lakh crore and Rs 50.65 lakh crore respectively. The net tax receipts are estimated at Rs 28.37 lakh crore.

Fiscal deficit

• On fiscal consolidation, the fiscal deficit for FY25 has been pegged at 4.8% of GDP and at 4.4% for FY26. Fiscal deficit is the difference between the government’s expenditure and its income.

Capital expenditure

• Capital expenditure or capex for FY26 is estimated to be Rs 15.48 lakh crores, which is at 4.3% of the GDP. The estimate for FY25 is revised to Rs 13.18 lakh crores (from Rs 15 lakh crores) which is at 4.1% of the GDP.

Tax receipts

• Tax receipts are estimated to increase to 12% of the GDP for FY26, as compared to the revised estimate of 11.8% of GDP during FY25. The share of direct tax receipts is estimated to be around 59% of the total tax receipts, which consolidates at 7.1% of GDP, while indirect tax is the remaining share which amounts to 4.9% of GDP.

Tax related Proposals in the Budget 2025-26

• Direct Tax

• No Personal Income Tax for Income up to Rs 12 Lakh: Taxpayers with income up to Rs 12 lakh (or Rs 12.75 lakh for salaried taxpayers due to a standard deduction of Rs 75,000) will not be required to pay personal income tax.

• 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.

• Reducing Compliance Burden– Reduction of compliance burden for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years.

Indirect Tax Proposal

Allocation to major ministries

• Defence was allocated over 6.8 lakh crores in the Budget, followed by Road Transport Highways and Railways. In last year’s interim budget, the Defence Ministry was allocated 6.2 lakh crores.

Transfers to States and Union Territories

• Around 25.6 lakh crore was budgeted as transfers to States and Union Territories. Of this, 14.2 lakh crore came from devolution of State’s share in taxes. Another 1.32 lakh crore came from Finance Commission grants. Scheme-related and other transfers amounted to 10.05 lakh crores.