Budget 2025-26 has earmarked a total allocation of Rs 50.65 lakh crores, out of which the estimated capex expenditure is at Rs 11.21 lakh crores (3.1 per cent of GDP) in FY 2025-26
New Delhi: Despite focusing on the four pillars of society -- poor, women, youth and farmers -- in Union Budget 2025-26, the government on Saturday brought cheer to the faces of salaried, middle class and elderly people as it announced a big bonanza on their personal income-tax in putting more money in their hands. The move aims to boost consumption demand, purchasing power of the aam aadmi as well as growth of the country’s economy. Besides, she also unveiled a blueprint for next generation reforms as she looked to shore up a slowing economy amid global uncertainties.
With some “hits and misses”, the first full Budget of the Modi 3.0 government also prioritised prudent fiscal management to maintain its pace as the fastest growing economy in the world and announced measures for growth, mainly through six “engines”, including MSMEs, agriculture, health, education and energy sectors, among others. Apart from tax relief for the middle class and others, there were a slew of projects for the state of Bihar as finance minister Nirmala Sitharaman tabled her eighth consecutive Budget in Parliament. Notably, it is believed to be her second shortest speech, while she holds the record of delivering the longest budget speech of two hours and forty minutes in 2020.
Addressing the media after tabling the Budget in the House, Ms Sitharaman said Budget 2025-26 focuses on rural prosperity, urban development and reforms, particularly for workers, and the government will continue to focus on its reforms. “The Budget, however, responded to people’s voices and tariffs are being brought down and simplified for the people as well. As far as tax relief is concerned, with the rejig in the income-tax slab rates, the Centre has put more money in the hands of people and one crore more people will pay no income-tax after the increase in the limit of income-tax rebate to Rs 12 lakhs in the Budget,” said Ms Nirmala Sitharaman.
Reacting to the Budget, Prime Minister Narendra Modi said that Budget 2025-26 was a “people’s budget” and it will boost investment and pave the way for the goal of “Viksit Bharat”, or developed India. “The Budget’s focus on ‘savings for people’ refers to two big-ticket announcements by Ms Sitharaman -- no income-tax for individuals earning up to Rs 12 lakhs (Rs 12.75 lakhs including the standard deduction) and a revision of tax slabs applicable under the new regime,” he added.
The Budget comes against the backdrop of the Indian economy growing at its weakest pace since the Covid-19 pandemic and rising geopolitical risks, particularly with new US President Donald Trump threatening to impose widespread tariffs, including on India. “The 6.4 per cent GDP growth estimated for the current fiscal and 6.3 to 6.8 per cent in the next are well below the eight per cent growth needed to meet the ambitious goal of making India a developed nation by 2047. Our endeavour will be to keep the fiscal deficit each year such that the Central government debt remains on a declining path as a percentage of GDP,” she said, projecting debt at 50 per cent of GDP by March 2031.
Budget 2025-26 has earmarked a total allocation of Rs 50.65 lakh crores, out of which the estimated capex expenditure is at Rs 11.21 lakh crores (3.1 per cent of GDP) in FY 2025-26. However, the Budget has some new “hits” like introduction of the new I-T Bill, announcement of a slew of new projects for states like Bihar and a few for Delhi and Jammu & Kashmir, unveiled the Union Cabinet’s plans for funding the integration of artificial intelligence, etc. It has “misses” too: no increase of capital expenditure, no significant funds for other states, including the NDA-led alliance government in Andhra Pradesh and others.
When asked about the reduction on capital expenditure, the finance minister said there is no reduction in public spending on capital expenditure and fiscal prudence has aligned itself to the glide path announced in 2021. “Rather, we continue to place emphasis on the multiplier effect that capital expenditure done by the government has shown has sustained us. We continue on that, and with all this, our fiscal prudence was maintained,” she said.
On the new income tax or I-T bill, the finance minister said the government proposed to introduce a new I-T bill in Parliament next week, replacing the six-decade-old Income-Tax Act 1961. “The new I-T Bill will be referred to a standing committee, and after that the new I-T Bill will carry forward the spirit of ‘Nyaya’ (justice) based on the concept of ‘trust first, scrutinise later’,” Ms Sitharaman said. She added that energy security has had greater attention in this Budget, in continuation to her July 2024 Budget.
