UNION

BUDGET
2025-26

Consumption Stimulus

Agricultural Growth

Industrial Impetus
 UNION BUDGET 2025:
MORE MONEY, MORE INVESTMENT,
MORE OPPORTUNITY

Can this Budget spur growth? That was possibly the single biggest question facing the Finance Minister when drafting this yearʼs
Union Budget, and the focus of all commentary and analysis once the budget was unveiled.

The Budget meets a long-standing demand - lower income tax to boost consumption, savings, and investment. Eschewing
populism, it focuses on structural growth, balancing demand, self-reliance, and fiscal discipline. Five key areas emerge as pivotal
levers of change, each reinforcing the broader vision of a globally competitive, investment-friendly, and financially resilient India.

Taxation: Putting more money in the hands of the middle class

Leaving more disposable income with millions of households is an investment in boosting household consumption and private
sector spending, which could, in turn, stimulate indirect tax collection and corporate revenues. In parallel, simplified TDS/TCS
compliance and higher thresholds for tax deductions reduce operational complexity for businesses, especially for small traders
and service professionals.

100% FDI in insurance: Unlocking capital and expanding coverage

A long-overdue reform, raising FDI in insurance to 100% injects fresh capital into a sector where penetration lags at 3.7% of GDP.
Here, the real winners stand to be households, small businesses, and farmers, who will gain better access to affordable health,
life, and agricultural insurance.

Reduction in customs duty reforms

The government lowers tariffs on key industrial inputs like lithium-ion batteries and critical minerals while raising duties on
finished imports such as footwear and textiles. The strategy is clear: Lower costs for domestic producers, reduce dependence
on imports, and push India further toward self-reliance. At the same time, reduced tariffs on exports like marine products and
textiles help Indian industries compete better in global markets.

MSME credit expansion: Driving entrepreneurship and employment

Access to finance can serve as a game changer for MSMEs and will allow small businesses to grow, innovate, and hire more
workers. Meanwhile, targeted loans for women, SC, and ST entrepreneurs break barriers and expand economic inclusion.

Infrastructure push: Connecting Indiaʼs growth engines

The Maritime Development Fund positions India as a serious player in global shipbuilding, cutting import reliance and creating
thousands of coastal jobs. UDAN 2.0 expands regional connectivity, linking Tier-2 and Tier-3 cities to economic hubs, unlocking
trade, tourism, and industry growth.

Infrastructure goes beyond transport—it is also about fortifying agriculture. The PM Dhan-Dhaanya Krishi Yojana takes a
targeted approach to boosting farm productivity, with investments in storage, irrigation, and credit aimed at reducing crop losses
and stabilising farmer incomes. Beyond land, the government is unlocking Indiaʼs maritime potential, expanding fisheries into the
EEZ and high seas to strengthen the blue economy and marine trade.

The Union Budget 2025-26 bets big on structural reforms rather than short-term giveaways. Putting more money in the hands
of consumers, fueling entrepreneurship at the grassroots level, pushing greater self-reliance through lower input tariffs and
infrastructure investments, this budget could be the shot-in-the-arm that we were waiting for.

Vasudevan Rangarajan
Head, Public & Government Affairs (India), Edelman
[email protected]

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 THE BIG PICTURE

Direct Tax Agriculture

• New Income Tax Bill to be introduced to • Announcement of agricultural
simplify and streamline taxation. development program under
PM - Dhan-Dhaanya Krishi Yojana for
• Greater Tax Relief - No income tax 100 districts, benefiting 1.7 crore
payable up to INR 12 lakh (USD 13,860) under the new (17 million) farmers.
tax regime as well as revised tax slabs.
• Initiation of a 5-year Cotton Productivity Mission to
• Capital Gains Tax Changes – Short-term capital gains improve cotton yield and sustainability with an outlay of
(STCG) on listed equity shares increased to 20% (from INR 500 crores (USD 58 million).
15%) and long-term capital gains (LTCG) tax set at 12.5%
across all assets, removing indexation benefits. • Launch of a 6-year mission with an INR 1,000 crore (USD
115 million) outlay for self-sufficiency in pulse production.
• Tax Deduction for Senior Citizens doubled from INR
50,000 (USD 577) to INR 1 lakh (USD 1,154). • Introduction of National Mission on High-Yielding Seeds
for enhanced agricultural productivity with an outlay of
• TDS/TCS Rationalization - Reduced rates and increased INR 100 crore (USD 12 million).
threshold limits to ease compliance.
• Launch of new initiative with an INR 500 crore (USD 58
million) outlay to enhance vegetable & fruit production,
secure fair prices for farmers, and improve access to
nutritious food.

Manufacturing and MSME Infrastructure

• New National Manufacturing Mission • Support to states for infrastructure via
announced with a focus on enhancing INR 1.5 lakh crore (USD 17.3 billion) outlay
EoDB, develop a skilled workforce, for 50-year interest-free loans.
empower MSMEs, ensure technology
access, and promote sustainable, high-quality • Setting up a Maritime Development Fund with a corpus of
manufacturing. INR 2500 crores (USD 288 million) with up to 49%
government contribution.
• Greater support for MSMEs through customised credit
cards with a limit of INR 5 lakh (USD 5,775) and an • Modification of UDAN Scheme to augment regional
increased credit guarantee cover of INR 10 crore (USD 1 connectivity to 120 new destinations.
million) (from 5 crore).
• Revamped Shipbuilding Financial Assistance Policy
• Focused measures for promotion of employment and including credit notes for shipbreaking; facilitation of
entrepreneurship opportunities in sectors including shipbuilding clusters to expand the range, categories, and
footwear & leather, toy and food processing. capacity of ships.

• Access for private sector to relevant data and maps from

PM Gati Shakti portal.

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 THE BIG PICTURE

Ease of Doing Business (EoDB) Innovation and Technology

• Regulatory reforms via Introduction of
• PM Research Fellowship for tech
Investment Friendliness Index of States;
research in IITs and IISc.
Jan Vishwas Bill 2.0 to decriminalise
over 100 legal provisions; and a
• Deep Tech Fund: A new INR 20,000 crore
high-level committee to review to review of all
(USD 2.30 billion) fund will be created to support
non-financial sector regulations, certifications, and
deep-tech startups and innovation.
licenses.
• Enhanced focus on AI-driven innovations in healthcare,
• Rationalisation of requirements and procedures for faster
education, and governance via Bharat AI Mission.
approvals of company mergers.
• Benefits for startups under Section 80-IAC for startups
• FDI limit for insurance sector raised from 74% to 100%.
extended for 5 more years.
• The current model Bilateral Investment Treaty (BIT) to be
• Centre of Excellence in Artificial Intelligence for education
revamped to make it more investor friendly, boost foreign
with a total outlay of INR 500 crore (USD 58 million).
investment and prioritize India's development.

• Revamped Central KYC Registry to be introduced along

with simplified KYC norms.

Social Welfare Export Promotion

• The Saksham Anganwadi & Poshan 2.0 • A National Guidance Framework for
scheme to enhance nutrition among promoting Global Capability Centres
8 crore (80 million) children, 1 crore (GCCs) in emerging Tier-2 cities.
(10 million) pregnant women, and lactating
mothers. • Creation of Export Promotion Mission with sectoral and
ministerial targets for easy access to export credit and
• Day Care Cancer Centers in all district hospitals to cross-border factoring support.
improve early cancer detection and provide accessible
treatment across the country. • Set up Bharat Trade Net as digital unified platform,
complementing ULIP, for trade documentation and
• Revised PM SVANidhi scheme with higher loan limits and financing solutions.
UPI-linked credit cards.
• Upgradation of infrastructure and warehousing facility for
• Registered gig workers on the e-Shram portal to be air cargo.
provided healthcare coverage under PM-JAY.

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 BUDGET ESTIMATES &
MARKET REACTIONS

Budget Estimates (2024-25)

(Numbers in INR)

2023-24 2024-25 2025-26

(Actuals) (Revised Estimates) (Budget Estimates)

Fiscal Deficit 5.6% 4.8% 4.4%

Revenue Deficit 2.6% 1.9% 1.5%

Gross Tax Revenue 34.7 trillion 38.5 trillion 42.7 trillion

Devolution of Statesʼ Share in Taxes 11.3 trillion 12.7 trillion 14.2 trillion

Market Reaction

The Union Budget 2025 has elicited mixed reactions from the Indian stock market. The NSE Nifty
50 declined by 0.27%, and the S&P BSE Sensex decreased by 0.14% on budget day. The modest
rise in capital expenditure to INR 11.2 trillion was perceived as insufficient by investors, leading to a
downturn in infrastructure-related stocks. The reduction in personal income tax rates is anticipated
to boost disposable incomes, thereby enhancing consumer spending. This optimism led to gains in
sectors like fast-moving consumer goods (FMCG) and automobiles.

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 OUTLAY OF SCHEMES

(Numbers in INR billion)

Fiscal Deficit
2,030 860 781.13 670
($23.4 bn) ($9.9 bn) ($9 bn) ($7.7 bn)
Revenue Deficit
Pradhan Mantri Garib Mahatma Gandhi Pradhan Mantri Awas National Rural Drinking
Gross Tax
Kalyan Revenue
Anna Yojana National Rural Yojna (PMAY)-Urban & Water Mission
(PMGKAY) Employment Guarantee Rural
Programme (MNREGA)

635 412.50 219.60 200

($7.3 bn) ($4.8 bn) ($2.5 bn) ($2.3 bn)

Pradhan Mantri Kisan Samagra Shiksha Saksham Anganwadi & New Employment
Samman Nidhi POSHAN 2.0 Generation Scheme
(PM-Kisan)

200 166.12 108.31 94.06

($2.3 bn) ($1.9 bn) ($1.3 bn) ($1.1 bn)

PM Surya Ghar Muft Bijli Production Linked New Internship Ayushman Bharat -
Yojana Incentive Schemes (PLI) Programme Pradhan Mantri Jan
Arogya Yojana (PMJAY)

The figures are compared with the budget estimates of 2024-25.

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 REVISIONS IN
CUSTOMS DUTIES

The Union Budget 2025 streamlines customs duties to boost domestic manufacturing,
enhance exports, and improve ease of doing business. Key reductions on lithium-ion battery
components, electronics, and technical textiles support ‘Make in Indiaʼ, while exemptions on
life-saving medicines and critical minerals benefit industries and consumers Additionally, the
Budget proposes to continue the exemption of Basic Customs Duty (BCD) on raw materials,
components, consumables, and parts for ship manufacturing for another ten years, further
strengthening Indiaʼs maritime sector. Higher duties on luxury imports encourage local value
addition. With simplified trade facilitation, these reforms foster economic growth and strengthen
Indiaʼs global manufacturing competitiveness.

Previous Duty New Duty

36 Drugs and Medicines

10% (Cancer and rare disease)
NIL

10% 6 life-saving drugs 5%

Waste and Scrap of

2.5% to 10% Critical Minerals and others
NIL

2.5% to 20% IT and Electronics Goods NIL

Motorcycles
50% (upto 1600 CC)
40%

Motorcycles
50% (>1600 CC)
30%

Used Motorcycles &

100% Mopeds
70%

10 to 20% Knitted fabrics 20% or, 115 per kg,

(specified tariff items) whichever is higher

Interactive flat
10% panel display
20%

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 EXPERT SPEAK
STRENGTHENING THE MIDDLE
CLASS AND ENCOURAGING
ECONOMIC GROWTH

The Union Budget 2025 has been strategically crafted to registration, and identity cards for formalizing their
make the new tax regime more attractive for taxpayers employment status. These initiatives are vital in ensuring
while maintaining fiscal prudence. With a focused that Indiaʼs rapidly expanding gig economy is adequately
approach on simplifying taxation, boosting disposable covered in terms of financial security and welfare
income, and encouraging consumption, the Government measures.
has introduced key tax reforms that align with economic
growth objectives. Additionally, streamlined e-visa facilities and visa fee
waivers for select foreign tourist groups reflect a strategic
Making the New Tax Regime More Attractive - One of the move to boost tourism and position India as a more
most significant announcements in this Budget is the attractive global destination. These initiatives demonstrate
restructuring of tax slabs and enhancement of tax rebates. a holistic approach to economic revitalization beyond just
Under the revamped structure, individuals earning up to tax policies.
INR 12 lakh annually (excluding capital gains) will have no
tax liability. This measure is expected to provide direct relief Looking Ahead - A New Income Tax Bill for Simplicity and
to a large segment of taxpayers, particularly the middle Reduced Litigation - The Honorable Finance Minister has
class, by ensuring greater net disposable income. By also signaled the introduction of a new Income Tax Bill next
stimulating consumption, these changes have the week, aiming to simplify the tax structure further and
potential to drive economic activity and contribute to reduce litigation. The promise of a more transparent and
broader growth. taxpayer-friendly system is a welcome move, particularly
for individuals and businesses that navigate complex tax
Additionally, the Government has addressed cash flow laws. If executed well, such reforms can lead to greater
concerns for individual taxpayers making foreign compliance, reduce tax disputes, and create a more
remittances, including those for education purposes, efficient taxation ecosystem.
through rationalized Tax Collection at Source (TCS)
provisions. Senior citizens, too, stand to benefit from Conclusion
enhanced cash flow as the interest income threshold for The Union Budget 2025 delivers on its promise of easing
Tax Deducted at Source (TDS) applicability has been tax burdens while maintaining fiscal responsibility. By
doubled to INR 1 lakh. This is a significant step in ensuring making the new tax regime more attractive, ensuring
that retirees retain greater liquidity for their financial needs. greater liquidity for senior citizens and remittance senders,
and focusing on the welfare of gig workers, the
Towards an Ideal Tax Structure - While the Government Government has demonstrated its commitment to holistic
has been proactive in refining the new tax regime, there economic growth. While there are still areas where further
remains a need for stability and predictability in tax rates. refinements could enhance long-term tax stability, the
Frequent changes can create uncertainty, impacting both current measures lay the foundation for a simpler, more
compliance and long-term financial planning. Instead of predictable, and taxpayer-friendly system.
frequent overhauls, minor but effective enhancements,
such as increasing the income threshold for a 100% tax The middle class, in particular, stands to benefit from these
rebate from INR 7 lakh to INR 10 lakh, could provide reforms, reinforcing confidence and optimism in the
additional relief without shrinking the tax base. This would broader economy. As we await further developments in tax
encourage more taxpayers to transition to the new regime legislation, the direction taken in this Budget underscores a
while maintaining government revenue collection. clear vision: to make Indiaʼs tax framework more efficient,
equitable, and growth oriented.
Measures to Support Specific Taxpayer Groups - Beyond
the tax slabs and deductions, the Budget introduces
measures to benefit targeted groups. Gig and platform Parizad Sirwalla
workers, who represent a growing share of Indiaʼs Partner and Head,
workforce, have been granted greater social security Global Mobility
support through healthcare benefits, e-Shram portal Services, Tax
KPMG in India

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