Budget 2025: Navigating Growth Amidst Global Uncertainty

The Union Budget 2025-26 focuses on accelerating economic growth, inclusive development, and private sector investments while uplifting household sentiments and middle-class spending power. It acknowledges geopolitical challenges that may impact global growth but sees the next five years as a window for transformation under Viksit Bharat. Key priorities include zero poverty, quality education, accessible healthcare, skilled labor, women’s economic participation, and a globally competitive agriculture sector. With strong infrastructure investments, policy reforms, and sectoral incentives, this budget lays the foundation for long-term economic resilience and balanced regional growth.
Ease of Doing Business: A Key Driver for Economic Growth
A business-friendly regulatory environment is crucial for accelerating economic growth, attracting investments, and fostering entrepreneurship. Simplified compliance, predictable taxation, and reduced bureaucratic hurdles encourage domestic and foreign businesses to expand operations, create jobs, and drive innovation. Recognizing this, the government has introduced targeted reforms to enhance Ease of Doing Business.
As part of ease of doing business reforms a high-level committee will review non-financial sector regulations to reduce compliance burdens, while the Investment Friendliness Index (2025) will encourage state-level competition to attract investments. Tax processes will be simplified, with higher TDS/TCS thresholds and removal of TCS on education loans and goods sales. Additionally, a three-year block scheme for transfer pricing and expanded safe harbour rules will streamline international taxation and minimize litigation.
By reducing regulatory complexity, increasing transparency, and ensuring tax predictability, these measures create a pro-business environment, positioning India as an attractive investment destination while supporting long-term economic expansion.
Key highlights of Budget 2025 – 26
- Massive Infrastructure Push: With ₹1.5 lakh crore in interest-free loans for states, the Asset Monetization Plan (₹10 lakh crore), and expansion in urban development (₹1 lakh crore fund), this budget strongly emphasizes long-term infrastructure growth.
- Energy Transition & Clean Tech: The National Manufacturing Mission and Nuclear Energy Mission (100 GW by 2047) show the government’s focus on clean energy and sustainability.
- Agriculture & Rural Development: Initiatives like ‘Dhan-Dhaanya Krishi Yojana’ for farmers, expansion of the Kisan Credit Card (₹5 lakh limit), and ₹60,000 crore fisheries sector boost are vital for rural economic stability.
- Tech & Innovation: The ₹500 crore Centre of Excellence in AI for Education, Deep Tech Fund for Startups, and policies supporting Global Capability Centres (GCCs) in Tier-2 cities reinforce India’s position as a tech-driven economy.
- Logistics: The government is strengthening maritime, aviation, and trade infrastructure with a ₹25,000 crore Maritime Development Fund, expanded UDAN regional connectivity, and BharatTradeNet (BTN) for digital trade solutions. Upgrades in air cargo, warehousing, customs protocols, and inland water transport will further boost logistics and exports.
- Affordable Housing: The SWAMIH Investment Fund has completed 50,000 homes, with 40,000 more set for 2025, and the government will launch SWAMIH Fund 2 (₹15,000 crore) to accelerate 1 lakh additional housing units, easing financial stress for homebuyers and boosting the real estate sector.
- Insurance sector: The FDI limit in the insurance sector will be increased from 74% to 100%, conditionally.
Income Tax relief
The Union Budget 2025-26 introduces significant income tax relief, raising the tax-free income limit from ₹7.75 lakh to ₹12.75 lakh, including standard deductions. The new tax regime expands the nil-tax slab from ₹0-3 lakh to ₹0-4 lakh, with revised tax rates: 5% for ₹4-8 lakh, 10% for ₹8-12 lakh, and 15% for ₹12-16 lakh. Higher incomes face 20-30% tax rates. These changes aim to boost middle-class savings, consumption, and investment, strengthening domestic demand and economic growth.
Capex Trends
The Union Budget 2025-26 sets a capital expenditure (capex) target of ₹11.21 lakh crore, a 9.8% increase from the previous year. However, the FY25 capex target of ₹11.11 lakh crore is expected to fall short by ₹93,000 crore, with actual spending at ₹10.18 lakh crore in the Revised Estimates. The shortfall is attributed to election-related slowdowns, limiting activity for nearly a quarter. Despite this, the government remains committed to strong capex growth, continuing its double-digit spending trend to drive infrastructure development and economic expansion.
Fiscal deficit
Fiscal deficit is the gap between the government’s total expenditure and its revenue receipts (including non-debt capital receipts), representing its borrowing needs. Measured as a percentage of GDP, it indicates fiscal health. A higher ratio shows greater reliance on borrowing, while a lower ratio suggests a balanced budget.
The government has revised its fiscal deficit target for FY25 to 4.8% of GDP, down from the earlier estimate of 4.9%, driven by higher revenue collections. For FY26, the fiscal deficit is projected to further decline to 4.4% of GDP, reflecting a focus on fiscal consolidation while maintaining growth momentum.
Key sectors & themes

The government is advancing infrastructure and investment reforms to drive economic growth. A ₹1.5 lakh crore fund will support state capital expenditure, while the second Asset Monetization Plan (2025-30) will unlock ₹10 lakh crore for reinvestment in key sectors.
An Urban Challenge Fund of ₹1 lakh crore will finance city development, and electricity distribution reforms will enable 0.5% additional GSDP borrowing for states. To expand clean energy, a ₹20,000 crore Nuclear Energy Mission will develop 100 GW of nuclear power by 2047, including five Small Modular Reactors (SMRs) by 2033.
For financial stability, NaBFID will introduce a Partial Credit Enhancement Facility for corporate bonds, and taxation certainty will be provided for Category I & II AIFs. Additionally, the SWF & Pension Fund tax exemption deadline is extended to 2030 to boost long-term infrastructure investment.

The government is strengthening agriculture, rural development, and economic resilience. The ‘Dhan-Dhaanya Krishi Yojana’ will uplift 100 low-productivity districts, benefiting 1.7 crore farmers through better irrigation, storage, and credit access. The ‘Rural Prosperity and Resilience’ programme will create jobs, empower women, and modernize agriculture.
The 6-year ‘Mission for Aatmanirbharta in Pulses’ will boost Tur, Urad, and Masoor production, while initiatives for high-yield seeds and cotton productivity will enhance sustainability. A sustainable fisheries framework will expand exports. The Kisan Credit Card (KCC) limit will increase to ₹5 lakh, and India Post will transform into a rural logistics hub.
Additionally, the tax holiday on income up to ₹12 lakh is expected to increase disposable income, particularly for middle-class households, leading to higher consumer spending on essential goods, housing, and discretionary items. This could provide a demand boost for sectors like retail, automobiles, and real estate, further stimulating economic growth and domestic consumption.
The Government has allocated ₹1,71,437 cr for agriculture and allied activities up from ₹1,40,859 cr spent during the 2025 fiscal period.

The government is enhancing maritime, aviation, and trade infrastructure through key initiatives. A ₹25,000 crore Maritime Development Fund will provide long-term financing, with up to 49% government contribution and the rest from ports and the private sector. A modified UDAN scheme will expand regional connectivity to 120 new destinations, targeting 4 crore passengers in 10 years, with a focus on hilly, aspirational, and Northeast districts.
To boost international trade, the government will launch ‘BharatTradeNet’ (BTN), a digital trade infrastructure for unified documentation and financing solutions, aligned with global standards. Air cargo infrastructure will be upgraded, improving warehousing, customs protocols, and facilities for high-value horticulture exports. Additionally, the tonnage tax scheme will be extended to inland vessels under the Indian Vessels Act, 2021, promoting inland water transport.
The government has allocated ₹5,48,649 cr for transportation projects in FY2025-26 up from the ₹5,41,384 expended during the 2025 fiscal period.

The government will launch a National Manufacturing Mission to support small, medium, and large industries, with a focus on Clean Tech manufacturing in solar, EV batteries, and renewable energy equipment. Additionally, exemptions on 35 capital goods for EV batteries and 28 for mobile phone batteries will boost domestic lithium-ion production.

The SWAMIH Investment Fund has completed 50,000 homes, with 40,000 more set for 2025, easing financial strain on middle-class homebuyers. To expand this success, the government will launch SWAMIH Fund 2, a ₹15,000 crore blended finance facility to complete 1 lakh additional housing units, boosting the real estate sector.
In addition, the Government has allocated ₹1,09,726 cr for affordable housing projects a significant jump from the ~₹71,000 expended during the 2025 fiscal period.

The Union Budget 2025 brings a significant tax relief, raising the income tax exemption threshold to ₹12 lakh, boosting disposable income and middle-class consumption. This shift is expected to drive demand across housing, retail, food & beverages, clothing, healthcare, and leisure, reinforcing India’s position as a top consumer market by 2030. As spending patterns evolve, companies with strong brand equity stand to benefit, leveraging consumer loyalty and pricing power to maintain financial resilience.
The Brand Value smallcase focuses on companies that have effectively capitalized on their brand strength, translating it into consistent financial performance and long-term growth potential.
Budgets and markets
The Budget 2025 comes at a time when the markets are under pressure due to foreign portfolio investor (FPI) outflows, rupee depreciation, rising oil prices, and weak corporate earnings. Given these macroeconomic challenges, the budget’s focus on infrastructure, clean energy, and investment-friendly reforms provides a much-needed long-term growth roadmap.
Short-Term Market Impact
Despite its pro-growth orientation, the budget may not provide an immediate boost to the markets due to external pressures. Higher crude oil prices can weigh on inflation and corporate profitability, while FPI outflows may continue in the near term, keeping the rupee under pressure. Additionally, with weak corporate earnings, investor sentiment may remain cautious in the short run.
Long-Term Market Implications
However, structural measures like the ₹10 lakh crore Asset Monetization Plan, ₹1.5 lakh crore in 50-year interest-free loans for states, and Urban Challenge Fund (₹1 lakh crore) position India for long-term investment-driven expansion. These initiatives are designed to drive capital formation, boost economic resilience, and enhance domestic growth prospects, laying a foundation for future market stability and expansion.
Investor Strategy
In times of market volatility and external headwinds, maintaining a long-term investment approach is crucial. Short-term pain often precedes structural growth, making it important for investors to stay disciplined and avoid reactionary decisions. A well-diversified multi-asset portfolio can help mitigate risks while ensuring participation in long-term wealth creation. Additionally, systematic investment plans (SIPs) continue to be an effective way to navigate market downturns, benefit from rupee cost averaging, and stay invested in growth-oriented opportunities.
Conclusion
The Union Budget 2025-26 presents a bold roadmap for economic expansion, balancing fiscal discipline with strong capital investments in infrastructure, clean energy, and rural development. With progressive tax relief, regulatory simplifications, and sectoral incentives, it aims to boost consumption, encourage private investment, and drive long-term growth. While short-term market volatility remains due to global macroeconomic challenges, the budget reinforces India’s economic resilience and positions the country for sustained structural growth. Investors and businesses should stay focused on long-term opportunities, leveraging government-driven growth themes while navigating near-term uncertainties with discipline.
PS: Here’s a downloadable version: tinyurl.com/wcpl-budget-2025-takeaways
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