But critics complain that the budget does not address the structural flaws in the Indian economy.

By PK.Balachandran

The Indian budget for the financial year 2025-26 was presented in the parliament by Finance Minister Nirmal Sitharaman on February 1. The budget aims to accelerate growth, secure inclusive development, invigorate private sector investment, uplift household incomes and enhance the spending power of India’s rising middle class. 

But critics say that the innate structural problems of the Indian economy have not been addressed. “It is not a 1991 reform budget,” which unleashed growth by reducing controls drastically. “The Indian economy’s DNA remains the same, with the government breathing down the neck of entrepreneurs,” experts added.  

However, a measure which will be welcomed by the middle class is that people earning up to INR 1.28 million (US$ 14,800) per year will not have to pay any income tax. The threshold has gone up from INR 700,000. 

The move will result in an annual INR 1 trillion (US$ 11.6 billion) hit to government revenues, Reuters said.  However according to Finance Minister Nirmala Sitharaman: “The new structure will reduce taxes on middle class and leave more money in their hands, boosting household consumption, savings and investment.” 

Still, the overall prospects for India do not look very bright with a predicted GDP growth rate of about 6% only. This is due to thinning  urban demand, weak private investment and high food inflation. Disposable incomes have come down. Per capita income is now about US$ 2,700 for India’s population of 1.4 billion. One-third of it is considered as middle class.

Accent on the Poor

However, the budget has announced measures to assist the poor, youth, farmers and women. Agriculture has been recognized as the first driver of growth. A nationwide program to push high-yielding crops, focusing on the cultivation of pulses and cotton production has been announced. The program will target at least 17 million farmers and raise the limit for subsidised credit offered to them from US$ 3,460 to US$ 5,760.

The “Dhan-Dhaanya Krishi Yojana” program in partnership with States will cover 100 districts with low productivity, moderate crop intensity and below-average credit parameters. It aims to (1) enhance agricultural productivity, (2) adopt crop diversification and sustainable agriculture practices, (3) augment post-harvest storage at the panchayat and block level, (4) improve irrigation facilities, and (5) facilitate the availability of long-term and short-term credit. 

Rural Unemployment 

A comprehensive multi-sectoral ‘Rural Prosperity and Resilience’ programme will be launched. This will address under-employment in agriculture through skilling, investment, technology, and invigorating the rural economy. The goal is to generate ample opportunities in rural areas so that migration is an option, but not a necessity. 

The programme will focus on rural women, young farmers, rural youth, marginal and small farmers, and landless families. Technical and financial assistance will be sought from multilateral development banks. In Phase-1, 100 agricultural districts will be covered.

The Government will now launch a six-year “Mission for Aatmanirbharta (self reliance) in Pulses” with a special focus on Tur, Urad and Masoor dhal.  Central agencies will be ready to procure these three pulse from farmers. A National Mission on High Yielding Seeds will be launched, along with strengthening the research ecosystem. Commercial availability of more than 100 seed varieties will be made.

Farmers’ Credit Cards

The Kisan Credit Cards (KCC) will facilitate short term loans for 77 million farmers, fishermen, and dairy farmers. The loan limit under the Modified Interest Subvention Scheme will be enhanced from INR 3 lakh to INR 5 lakh for loans taken through the KCC.  

The Government had reopened three dormant urea plants in the Eastern region. To further augment urea supply, a plant with annual capacity of 12.7 lakh metric tons will be set up at Namrup, Assam.

A five-year Mission for Cotton Productivity will facilitate significant improvements in productivity and sustainability of cotton farming, and promote extra-long staple cotton varieties. 

Fisheries

India ranks second-in the world in fish production. Seafood exports are valued at INR 600,000 million. The Government will bring in an enabling framework for sustainable harnessing of fisheries from the Indian Exclusive Economic Zone and High Seas, with a special focus on the Andaman & Nicobar and Lakshadweep Islands. 

MSMEs

MSMEs have been recognised as the second engine of growth. There are 5.7 crore MSMEs. Over 1 crore registered MSMEs, employing 7.5 crore people, and generating 36% of our manufacturing, have positioned India as a global manufacturing hub. The MSMEs are responsible for 45% of India’s exports. 

To help them achieve higher efficiencies of scale and technological upgrading and better access to capital, the investment and turnover limits for classification of all MSMEs will be enhanced by 2.5 and 2 times respectively. This will give them the confidence to grow and generate employment for our youth.

For MSMEs, credit will be enhanced from INR 5 crore to 10 crore, leading to additional credit of INR 1.5 lakh crore in the next 5 years. For Start-ups, it will be from INR 10 crore to 20 crore. For well-run exporter MSMEs, term loans will be available up to INR 20 crore.    

Customized Credit Cards with a INR 5 lakh limit for micro enterprises registered on the Udyam portal will be introduced. In the first year, 10 lakh such cards will be issued. The Alternate Investment Funds (AIFs) for start-ups have received commitments of more than INR 91,000 crore. 

The government will set up a National Manufacturing Mission covering small, medium and large industries for furthering “Make in India” by providing policy support, execution roadmaps, governance and monitoring framework for central ministries and states. 

The FDI limit for the insurance sector will be raised from 74 to 100%. This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditions associated with foreign investment will be reviewed and simplified. 

Nuclear Energy 

Development of at least 100 GW of nuclear energy by 2047 is essential for India’s energy transition efforts. For an active partnership with the private sector towards this goal, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be taken up.

A Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of INR 20,000 crore will be set up.  At least 5 indigenously developed SMRs will be operationalised by 2033.

Skilling 

Five National Centres of Excellence for skilling will be set up with global expertise and partnerships to equip India’s youth with the skills required for “Make for India, Make for the World” manufacturing. The partnerships will cover curriculum design, training of trainers, a skills certification framework, and periodic reviews.

Total number of students in 23 Indian Institute of Technology (IIT) has increased 100% from 65,000 to 1.35 lakh in the past 10 years. Additional infrastructure will be created in the 5 IITs started after 2014 to facilitate education for 6,500 more students. Hostel and other infrastructure capacity at IIT, Patna will also be expanded. 

Women Entrepreneurs 

A new scheme will be launched for 5 lakh women, Scheduled Castes and Scheduled Tribes who are first-time entrepreneurs. This will provide term loans up to INR 2 crore during the next 5 years. 

The National Manufacturing Mission will also support Clean Tech manufacturing. This will aim to improve domestic value addition and build our ecosystem for solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, very high voltage transmission equipment and grid scale batteries

AI

A Centre of Excellence in Artificial Intelligence for Education will be set up with a total outlay of INR 500 crore. Broadband connectivity will be provided to all Government secondary schools and primary health centres in rural areas under the Bharatnet project. 

Medical Education 

Government has added almost 1.1 lakh Under Graduate and Post Graduate medical education seats in ten years, an increase of 130%. In the next year, 10,000 additional seats will be added in medical colleges and hospitals, towards the goal of adding 75,000 seats in the next 5 years. 

Day Care Cancer Centres in all district hospitals will be set up in the next 3 years. 200 Centres will be established in FY 2025-26. 

Urban Poor

A scheme for socio-economic uplift of urban workers will be implemented to help them improve their incomes, have sustainable livelihoods and a better quality of life. The PM SVANidhi scheme has benefitted more than 68 lakh street vendors giving them respite from high-interest informal sector loans. Building on this success, the scheme will be revamped with enhanced loans from banks, UPI linked credit cards with INR 30,000 limit, and capacity building support. 

The Government will arrange for gig workers, identity cards and registration on the e-Shram portal. They will be provided healthcare under PM Jan Arogya Yojana. This measure is likely to assist nearly 1 crore gig-workers. 

Potable Water

Since 2019, 15 crore households representing 80% of India’s rural population have been provided access to potable tap water connections. To achieve 100% coverage, Jal Jeevan Mission will be extended until 2028 with an enhanced total outlay

Infrastructure 

An outlay of INR 1.5 lakh crore is proposed for the 50-year interest free loans to states for capital expenditure and incentives for reforms in the infrastructure sector.   

The Government will set up an Urban Challenge Fund of INR 1 lakh crore to implement the proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’ and ‘Water and Sanitation’, which were announced in the July 2024 Budget. This Urban Challenge Fund will finance up to 25% of the cost of bankable projects.An allocation of INR 10,000 crore is proposed for 2025-26.

Domestic Air Connectivity

A modified UDAN scheme will be launched to enhance regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years. The scheme will also support helipads and smaller airports in hilly, aspirational, and North East region districts. 

Tourism     

Top 50 tourist destination sites in the country will be developed in partnership with states through a challenge mode. Land for building key infrastructure will have to be provided by states. Hotels in those destinations will be included in the infrastructure HML.  

Introducing streamlined e-visa facilities along with visa-fee waivers for certain tourist groups. There will be a special focus on destinations related to the life and times of Lord Buddha

Maritime Fund

For long-term financing for the maritime industry, a Maritime Development Fund with a corpus of INR 25,000 crore will be set up

Research

INR 20,000 crore will be allocated to implement private sector driven Research, Development and Innovation initiative announced in the July Budget. In the next five years, under the PM Research Fellowship scheme, ten thousand fellowships will be provided for technological research. 

Exports 

A digital public infrastructure, ‘BharatTradeNet’ (BTN) for international trade will be set-up as a unified platform for trade documentation and financing solutions. This will complement the Unified Logistics Interface Platform. The BTN will be aligned with international practices. 

Tax and Regulatory Structure

The budget reaffirmed the commitment of the tax department to “trust first, scrutinize later”. A new income-tax bill will be introduced next week

The government is determined to ensure that India’s regulations must keep up with technological innovations and global policy developments. A light-touch regulatory framework based on principles and trust will unleash productivity and employment. Through this framework, regulations that were made under old laws will be updated. To develop this modern, flexible, people-friendly, and trust-based regulatory framework appropriate for the twenty-first century, four specific measures will be undertaken:

A High-Level Committee for Regulatory Reforms will be set up for a review of all non-financial sector regulations, certifications, licenses, and permissions. The committee will be expected make recommendations within a year. The objective is to strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’, especially in matters of inspections and compliances.  States will be encouraged to join in this endeavour. 

An Investment Friendliness Index of States will be launched in 2025 to further the spirit of competitive cooperative federalism. 

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