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Analysis of Government Budget 2025-2026 key highlights and impact
What is the budget?
A government budget is like the master financial blueprint of a country. It’s a detailed plan
that outlines how the government expects to earn money and how it intends to spend it
over a specific period, usually a year. Think of it as a reflection of national priorities—what
the state values, where it's willing to invest, and how it balances the needs of its citizens
with the resources available. On one side, you have revenue, the money the government
collects, mostly through taxes; like income tax, corporate tax, customs duties, and
sometimes even fees or profits from state-owned enterprises. This is the lifeblood of
government operations, flowing in from households, businesses, and trade. On the other
side is expenditure, the planned spending. This covers everything from paying salaries of
public servants to building roads, funding schools, running hospitals, supporting farmers,
maintaining defense forces, and sometimes even providing subsidies or welfare to the
vulnerable sections of society. But it’s not just a list of numbers. The budget reveals a
nation’s ambitions: whether it’s pushing for economic growth, reducing inequality,
addressing climate change, or bolstering infrastructure. It can be balanced (where income
matches expenses), deficit (spending more than earning), or surplus (spending less than
earning), each with its own economic implications. In essence, the government budget is
more than a financial document—it’s a narrative of a country’s goals, challenges, and vision
for the future, written in the language of money. In India, the financial year starts from 1st
April and ends on 31st March The process of budget approval in India follows a structured
parliamentary procedure. The budget is presented to the parliament by the finance minister
every year, where, if it is approved, it is implemented from the 1st of April.
KEY FACTORS OF THE 2025-26 BUDGET WITH THEIR RESPECTIVE TARGET
AREAS
1)Tax Reforms & Fiscal Strategy: Personal Income Tax: The new income tax regime now
exempts individuals earning up to ₹12.75 lakh annually, effectively reducing tax liability for
many middle-income earners. Fiscal Deficit: Targeted at 4.4% of GDP, indicating a
commitment to fiscal consolidation. Capital Expenditure (Capex): Allocated ₹11.21 lakh crore
(3.1% of GDP) to infrastructure development.
2)Agriculture & Rural Development: PM Dhan-Dhaanya Krishi Yojana: A new program
covering 100 districts to benefit 1.7 crore farmers. Mission for Aatmanirbharta in Pulses: A
six-year initiative focusing on pulses like Tur, Urad, and Masoor. Kisan Credit Cards: Loan limit
increased to ₹5 lakh for farmers, fishermen, and dairy farmers
3)Healthcare & Education: Healthcare: ₹1.35 lakh crore allocated, marking a significant
increase from previous budgets. Education: Expansion of 5 IITs and a ₹500 crore Centre of
Excellence in Artificial Intelligence for education.
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4)Industry, MSMEs & Startups: MSME Support: Enhanced investment and turnover limits,
along with a new ₹10,000 crore Fund of Funds. Startup Ecosystem: Introduction of
customized credit cards with ₹5 lakh limit for micro-enterprises.
5)Infrastructure & Connectivity: UDAN Scheme: Expansion to 120 new destinations, aiming
to serve 4 crore passengers over the next decade. Maritime Development Fund: ₹25,000
crore corpus to enhance port infrastructure
6)Energy & Technology: Nuclear Energy Mission: ₹20,000 crore allocated for the
development of Small Modular Reactors, with 5 units operational by 2033. AI Development
Fund: ₹10,000 crore earmarked to promote artificial intelligence, robotics, and digital
infrastructure.
7)Housing & Urban Development: SWAMIH Fund 2: ₹15,000 crore allocated for the
completion of 1 lakh housing units. Smart City Expansion: Plans to enhance urban
infrastructure and living standards.
FISCAL PARAMETERS
1)Fiscal deficit: Target for 2025–26: 4.4% of GDP Significance: This shows the gap between
the government’s total expenditure and total revenue (excluding borrowings). A lower fiscal
deficit means the government is aiming for more sustainable spending. Trend: It marks a
continued effort to reduce the deficit from the COVID-era highs (it was 9.2% in 2020–21).
2)Revenue deficit: Estimate: Not separately emphasized in the budget speech, but generally
lower than the fiscal deficit due to increased capital expenditure. Significance: It reflects the
shortfall in revenue receipts compared to revenue expenditure, showing how much of the
government’s spending is not backed by its regular income.
3)Primary deficit: Definition: Fiscal Deficit minus interest payments. Relevance: Shows the
current fiscal stance without the burden of past borrowings. Implies whether the
government is borrowing just to service old debt or to meet new expenses.
4)Other important metrics: Capital expenditure allocation- ₹11.21 lakh crore (~3.1% of GDP)
Target gross tax revenue- approximately ₹38.68 lakh crore Disinvestment target -₹50000
crore Debt to GDP ratio not explicitly targeted in the budget, but overall public debt remains
around 82–84% of GDP, a concern for long-term fiscal sustainability. These parameters show
a clear intent toward fiscal consolidation, while maintaining strong growth-oriented
investment, particularly in infrastructure and technology.
SECTORIAL IMPACT
1)Health sector: Allocation: ₹1.35 lakh crore (significant increase). Focus Areas: Digital health
records under Ayushman Bharat Digital Mission. Boost in disease surveillance and AI-driven
diagnostics Enhanced nutrition schemes like Poshan 2.0 and maternal care programs.
Impact: Better rural access, preventive care, and tech-enabled health infrastructure.
2)Education sector: Allocation: ₹1.24 lakh crore. Key Moves: Expansion of IITs and AIIMS.
₹500 crore for AI Centres of Excellence. Skill India Digital Platform for training in AI, robotics,
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coding, etc. Impact: Aligns with NEP, expands digital learning, and prepares workforce for
tech-driven jobs.
3)Green energy: Investment: ₹20,000 crore for nuclear energy (SMRs). Support for green
hydrogen and solar rooftop schemes. Battery storage systems via Viability Gap Funding.
Impact: Drives clean energy transition, supports Net Zero by 2070, and boosts green tech
jobs.
4)Climate change and sustainabilty: Initiatives: Carbon credit trading and climate budgeting
for states. Funds for climate-smart agriculture and sustainable irrigation. Urban focus on EVs,
waste-to-energy, and green infrastructure. Impact: Promotes mitigation and adaptation,
environmental accountability, and eco-resilient development.
SOCIAL IMPACT: The Union Budget 2025–26 has several provisions that aim to create a
meaningful social impact, particularly through poverty alleviation programs and
employment generation initiatives. The budget continues to prioritize social equity by
strengthening welfare schemes targeted at economically weaker sections. One of the major
announcements was the enhancement of the PM Garib Kalyan Yojana, which has been
restructured to provide direct cash transfers, subsidized food, and expanded health coverage
to vulnerable households. The government also announced the continuation of free food
grain distribution under the National Food Security Act, benefiting over 80 crore citizens.
This move is especially significant for rural poverty alleviation and food security. In terms of
employment, the budget emphasizes job creation through a blend of infrastructure
investment and support for micro, small, and medium enterprises (MSMEs). The increase in
capital expenditure to ₹11.21 lakh crore is expected to generate millions of direct and
indirect jobs in construction, transportation, and logistics. Simultaneously, the government
introduced a ₹10,000 crore Fund of Funds specifically to boost MSMEs, aiming to improve
their access to credit and scale operations—this sector is a major employment generator,
particularly in semi-urban and rural India. For rural employment, the Mahila Sashaktikaran
Abhiyan was introduced as a new initiative focusing on women's self-help groups (SHGs),
providing them with skills training, microfinance access, and support for home-based
businesses. The MGNREGA scheme continues to receive robust funding, ensuring livelihood
support in times of agrarian distress or off-season unemployment. Furthermore, the Start-
Up India mission saw the introduction of customized credit cards for small entrepreneurs
with a ₹5 lakh limit, encouraging self-employment and micro-enterprise development.
Alongside this, large-scale skill development programs under the Skill India Digital Platform
are designed to upskill the youth in emerging technologies like AI, robotics, and renewable
energy, which not only meet future workforce needs but also enhance employability in both
rural and urban sectors. In essence, the social impact of the 2025–26 budget lies in its multi-
pronged approach—combining direct welfare support, rural job schemes, targeted credit for
small businesses, and large public investment to create a more inclusive and employment-
rich growth environment
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ECONOMIC GROWTH AND INVESTMENT:
The Union Budget 2025–26 places strong emphasis on boosting economic growth by
supporting the government’s flagship initiatives—Make in India and Atmanirbhar Bharat.
The expansion of PLI schemes across strategic sectors such as electronics, pharmaceuticals,
green technology, and defense manufacturing aims to encourage domestic production,
reduce import dependency, and enhance exports. By providing financial incentives linked to
output and innovation, these schemes stimulate industrial growth and create job
opportunities, particularly in manufacturing hubs. The budget also allocates a substantial
₹11.21 lakh crore towards capital expenditure, strengthening infrastructure, logistics, and
supply chains, which are critical for efficient manufacturing and business operations. This
investment not only enhances India’s industrial competitiveness but also lays the foundation
for sustained economic expansion. In line with the Atmanirbhar Bharat mission, the
government continues to support MSMEs through easier credit access, tax relief, and
simplified compliance procedures, helping smaller enterprises grow and contribute to
employment generation. On the foreign investment front, the budget introduces reforms
aimed at attracting global capital. These include FDI policies, new bilateral investment
treaties to offer better protection and clarity for investors, and tax incentives targeted at
foreign companies investing in high-tech industrial clusters and sustainable energy projects.
Additionally, mechanisms like sovereign green bonds and Infrastructure Investment Trusts
(InvITs) provide institutional investors with attractive opportunities to participate in India’s
growth story, together, these measures aim to build a robust, self-reliant economy by
strengthening domestic manufacturing capabilities while integrating with global investment
flows, ultimately driving sustained economic growth and employment creation.
CHALLENGES AND LIMITATIONS: First, limited fiscal space may constrain future
spending, even as the government balances high capital expenditure with deficit reduction.
Implementation issues across states remain a concern, with variations in administrative
capacity potentially weakening outcomes, especially in healthcare, education, and welfare
schemes. On employment, while infrastructure investments create jobs, they may not
provide enough immediate opportunities for India’s large unskilled workforce. Similarly,
MSMEs and startups still face operational hurdles like limited credit and delayed payments.
The transition to green energy, though well-funded, is slowed by high costs, technology
gaps, and execution challenges—particularly in rural areas. Additionally, foreign investment,
though encouraged through incentives, may be hindered by regulatory concerns, land
acquisition issues, and global economic uncertainty. In education and skilling, a persistent
digital divide and uneven access limit the impact of new tech-driven programs. Rising
inflation or subsidy cuts could also strain poor households, reducing the social impact of
welfare schemes. Lastly, the absence of robust monitoring systems risks inefficiency and
leakages in large-scale programs. For the budget’s goals to be realized, stronger governance,
better coordination, and continuous reforms will be crucial.
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NEWSPAPER ARTICLES AND ANALYSIS:
1)This article by The Times of India highlights the government's focus on infrastructure
investment as a key driver of economic growth. Experts emphasize the need for increased
spending in sectors like railways, power, and urban infrastructure to meet the ambitious $7
trillion economy target by 2030. The piece also discusses the importance of public-private
partnerships and green initiatives in achieving sustainable development.
2)This analysis by The Economic Times examines how the budget addresses the four key
engines of growth: consumption, investment, exports, and infrastructure. The article notes a
significant overhaul in personal income tax, aiming to boost domestic consumption. It also
discusses measures to strengthen India's manufacturing base, reduce dependence on
imports, and enhance global competitiveness through structural reforms.
3)This report by The Hindustan Times features reactions from industry leaders in Uttar
Pradesh, praising the budget's comprehensive approach to economic growth. The article
highlights the government's focus on infrastructure, rural resilience, and private sector
growth, aligning with the vision of a 'Viksit Bharat.' It also notes that the budget's emphasis
on consumption, investment, innovation, and employment will re-energize the economy and
encourage private sector investment.
MY OPINION AND A SUGGESTION:
The Union Budget 2025–26 lays a strong foundation for long-term economic growth through
record infrastructure investment, manufacturing incentives, and a push toward green energy
and digital innovation. It supports self-reliance under Atmanirbhar Bharat, while also
signaling openness to foreign capital. However, the success of these measures hinges on
efficient state-level execution, timely job creation, and stronger support for MSMEs. As a
suggestion I would recommend that, to truly unlock the budget's potential, the government
must invest in capacity building at the grassroots level, ensure ease of doing business for
small enterprises, and implement robust monitoring mechanisms that prevent inefficiencies
and leakages. A bold vision needs equally strong delivery.
CONCLUSION:
In conclusion I think i can confidently state that the Union Budget 2025–26 presents a well-
structured plan focused on accelerating economic growth, empowering key sectors like
health, education, and green energy, and driving investment through initiatives such as
Make in India and Atmanirbhar Bharat. It strikes a balance between fiscal consolidation and
development spending, aiming to build a resilient and future-ready economy. However, the
true success of this budget will rely on effective implementation across states, support for
MSMEs, and the ability to create meaningful employment opportunities. With sustained
focus and accountability, the budget has the potential to move India closer to its goal of
becoming a developed nation by 2047.
