Budget 2025: Driving inclusive growth and economic resilience

As India navigates economic headwinds, PM Modi’s 3.0’s first complete Union Budget was perhaps one of the most anticipated ones. FM Nirmala Sitharaman dealt with the challenge of having to spur consumption, motivate industry and rein in the fiscal deficit.

With Union Budget 2025, FM Nirmala Sitharaman has succeeded in walking the tightrope between addressing immediate economic challenges and fulfilling the Government’s vision “Sabka Saath, Sabka Vikas, Sabka Vishwas aur Sabka Pryaas” for the future. While the proposal to raise the threshold of nil income tax to ₹12 lakh for individuals has received attention, there are other positive announcements in the budget for the economy’s growth.

The four key engines of development—agriculture, MSMEs, investments, and exports—laid down by the finance minister clearly outlined the government’s focus areas. Rightly so, the announcements in the budget are designed to catalyse growth, increase employment, boost consumption and foster economic resilience.

In a democracy like India addressing every concern is complex and cannot be resolved with a single action. This inherent complexity often leads to criticism which can be easy as no single measure can fully satisfy the needs of all stakeholders.

In this context, the budget is well-balanced aiming to address the diverse needs of a vast population. It reflects the government’s attempt to prioritise growth, equity and Fiscal responsibility. Constructive criticism is essential but we must also acknowledge the challenges of a dynamic and multifaceted India.

For capital markets, this budget would continue to serve as an engine of wealth creation for the larger population with the potential to drive India’s market capitalisation to new heights. The budget did not address the high Securities Transaction Tax or Lower Capital Gains Tax, but despite this the capital markets are poised for growth due to sound economic fundamentals and domestic investor confidence.

Growth for Everyone

While empowering domestic enterprises, the budget also strengthens India’s global trade position. Agriculture remains the backbone of India’s economy and a crucial pillar of rural socio-economic development. The budget’s announcements focus on modernizing agriculture, increasing farmer incomes, ensuring food security, and enhancing rural infrastructure. Through greater capital inflow and technological advancements in agriculture, productivity is set to rise, benefiting farmers and agribusinesses across the country. These measures will also strengthen supply chains and reinforce food security.

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in job creation and economic stability. The decision to double the Credit Guarantee cover from ₹5 crore to ₹10 crore will enable MSMEs to access more capital, expand operations, and contribute more effectively to GDP growth. This will generate employment opportunities and further empower small entrepreneurs in driving India’s economic progress.

In international trade, the introduction of Bharat Trade Net, along with enhancements in the shipbuilding sector, aims to streamline trade operations, improve export efficiency, and boost the ease of doing business. These initiatives will also create employment opportunities in the marine and allied industries.

The Finance Minister highlighted three critical investment pillars—People, Economy, and Innovation—designed to accelerate growth and enhance global competitiveness.

To further catalyse economic growth, the Finance Minister introduced tax reforms that benefit multiple segments of society. A significant highlight of the budget is the revision of the nil Income Tax slab to ₹12 lakh, offering substantial relief to the middle class. This move will increase disposable incomes, spur private consumption and demand. Additionally, the revamp of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions will enhance taxpayer confidence and ensure better compliance. Senior citizens, in particular, will benefit from the doubling of the TDS threshold, enhancing their financial security.

Building India

The allocation of ₹20,000 crore to support private sector-driven research is a step toward positioning India at the forefront of global technological advancements. The establishment of a deep-tech fund-of-funds will further accelerate innovation by providing financial backing to next-generation start-ups in artificial intelligence, robotics, and other emerging fields. Additionally, the government’s plan to set up 50,000 Atal Tinkering Labs in government schools over the next five years is a transformative initiative aimed at fostering scientific curiosity among young minds. This initiative aims to nurture future global IT leaders from India’s towns and cities.

The asset monetization plan, with a target of ₹10 lakh crore, reflects the government’s forward-thinking approach to infrastructure financing, potentially ushering in a new era of public-private partnerships. The budget’s focus on innovation and urban development is equally promising, with the ₹20,000 crore innovation promotion fund and the Urban Challenge Fund set to enhance India’s standing in the global knowledge economy.

Beyond research and innovation, India’s tourism sector is also poised for significant growth with the proposal to develop 50 tourist destinations in collaboration with state governments. This initiative is expected to attract more domestic and international visitors, stimulate local economies, and create new employment opportunities. Furthermore, the ‘Heal in India’ initiative will strengthen India’s position as a leading destination for medical tourism, improving healthcare infrastructure while boosting foreign exchange earnings.

Relief That Counts

The budget introduces a range of schemes and missions aimed at improving the welfare of the poor, youth, farmers, and women. These initiatives are designed to empower disadvantaged groups, boost youth employment, support agricultural growth, and promote women’s development for inclusive progress.

Targeted social welfare measures, such as protections for gig workers and a new scheme benefiting Scheduled Caste (SC) and Scheduled Tribe (ST) women entrepreneurs, will further promote social equity and financial inclusion. By fostering entrepreneurship and expanding economic opportunities for marginalized communities, these initiatives will help bridge economic disparities.

The Path Forward

The ₹20,000 crore Innovation Promotion Fund, alongside the ₹1 lakh crore Urban Challenge Fund shows the government’s commitment to transforming our cities into engines of future growth. This comprehensive urban transformation encompasses modernising city infrastructure, implementing sustainable urban planning initiatives, enhancing civic amenities, and developing state-of-the-art public transportation systems.

Furthermore, the strategic push to establish India as a manufacturing hub for labor-intensive industries such as toys, footwear, and leather will enhance competitiveness and job creation.

Despite announcing extensive relief measures, the Finance Minister has effectively maintained the estimated fiscal deficit at a commendable 4.4% of GDP. This fiscal discipline, coupled with simplifying tax structures, easing regulatory burdens, is a step forward towards sustainable growth. The Budget 2025 thus marks a milestone in the long-term vision of a ‘Viksit Bharat’ by 2047. It balances immediate economic priorities with long-term strategic goals, setting a clear roadmap for India’s economic transformation.”

Author is MD, Bajaj Broking. Views are personal.