Union Budget 2025-26 has attempted to accelerate economic growth, empower the middle class, simplify taxation and promote sustainability for a developed and self-reliant Bharat.
Spurring consumption while sticking to
consolidation path
The budget, presented
against the backdrop of slowing economic growth, decelerating urban consumption
and rising demands for tax relief, particularly from middle class, aims to
boost economic growth by reducing the fiscal deficit to 4.4% of gross domestic
product (GDP), while maintaining capital expenditure at 3.1% of GDP and
increasing effective capital expenditure to 5.5% of GDP. These moves are also
expected to stimulate the domestic economy and attract private investment.
Capex break-up
across sectors
The following chart shows the top 10
ministries/departments, which account for almost 95% of the budgetary capex of
Rs 11.2 lakh crore next fiscal. The Ministry of Road Transport and Highways
continues to get the highest capex allocation in the budget (24.3% of total
budgetary capex, even though it is down from 26.7% share in fiscal 2025),
followed by Ministry of Railways (22.5%), Ministry of Finance[1] (19.8%), Ministry of Defence (16.1%) and Ministry of Communications
(4.7%). These five ministries together receive a commanding 87.3% share of the
total budgetary capex.
[1] Reflects interest-free state capex loans
Note: Significantly higher capex allocation to
the Ministry of Finance is largely a reflection of state capex loans that are
routed through this ministry and are budgeted at Rs 1.5 lakh crore next fiscal.
Source: Budget document, Crisil
The budget allocates Rs 11.2 lakh crore for capital expenditure, a 10% year-on-year increase that is expected to drive growth in infrastructure sectors such as roads, railways, and urban development. The government has also earmarked Rs 4.27 lakh crore for grants-in-aid to create capital assets, a significant 42.4% increase from the previous year.
The budget also
offers tax relief to the middle class by raising the tax exemption limit from
Rs 7 lakh to Rs 12 lakh a year. This move, which will benefit 72% of income
taxpayers, would provide a consumption boost. The tax relief is anticipated to
yield annual tax savings of Rs 80,000 for individuals earning up to Rs 12.75
lakh, thereby pushing up middle-class spending and, consequently,
economic growth.
The government has revised its fiscal anchor from fiscal deficit to debt-GDP ratio, with a goal to reduce central government debt to 50% of GDP by fiscal 2031. There is an attempt to strike a balance between fiscal support for capex and subsidies to facilitate green transition and reduce the intensity of carbon emissions. That said, the budget math is susceptible to risks such as a potential economic slowdown, geopolitical uncertainties, and demand-supply mismatches. The government’s resolve to reduce the debt-GDP ratio and maintain fiscal discipline is crucial to achieve the economic objectives mentioned in the budget and ensure long-term sustainability.
The fiscal math
The government is
committed to continuing on the path of fiscal consolidation, with a target to
reduce the fiscal deficit to 4.4% of GDP in the next fiscal year. This is lower
than the fiscal 2025’s revised estimate of 4.8%. This reduction was made
possible through a rationalisation of revenue expenditure, coupled with
expected support from tax collections and non-debt capital receipts. Although
the budgeted deficit for next fiscal is significantly lower than the peak of
9.2% of GDP seen in fiscal 2021, it is still above the pre-pandemic average of
3.8% of GDP, which was the norm during fiscals 2016-2020.
Fiscal position for FY25:
The Revised Estimate of the total receipts other than borrowings is Rs 31.47 lakh crore, of which the net tax receipts are Rs 25.57 lakh crore. The Revised Estimate of the total expenditure is Rs 47.16 lakh crore, of which the capital expenditure is about Rs 10.18 lakh crore. The Revised Estimate of the fiscal deficit is 4.8 per cent of GDP. The fiscal deficit is estimated to be 4.4 per cent of GDP for FY 26. To finance the fiscal deficit, the net market borrowings from dated securities are estimated at Rs 11.54 lakh crore.
Source: Budget
documents
What is the plan to achieve fiscal consolidation
in fiscal 2026?
Building on its success in keeping the fiscal deficit below the budgeted target of 4.9% this fiscal, the government has set a fiscal deficit target of 4.4% for fiscal 2026. To achieve this, it plans to moderate revenue expenditure, with a decrease in the share of GDP allocated to pensions, food and fertiliser expenditures, while maintaining the share of capital expenditure in GDP.
On the revenue side, the government is counting on strong tax collections, as well as significant contributions from disinvestment revenue and a large dividend from the Reserve Bank of India and other central public sector undertakings to help reduce the fiscal deficit and meet its target (see chart below).
Note:
NDCR stands for non-debt capital receipts, largely representing disinvestments
Source: Budget documents, CEIC, Crisil
- Nominal growth assumption is realistic: The government has made a modest assumption of a 10.1% nominal growth rate for next fiscal, representing a slight increase from the 9.7% estimated for the current fiscal. This forecast appears reasonable, as it is aligned with the expectations of a minor uptick in real growth for the upcoming year, suggesting a cautious yet optimistic outlook for the economy.
- Tax targets appear achievable: Tax collections for next fiscal are expected to moderate but still grow at a healthy 14.4%, following a 20.3% growth anticipated for the current fiscal. Despite the introduction of relief measures, income tax collections are projected to remain strong, reflecting the benefits of structural improvements, including increased formalisation and compliance driven by digitalisation.
Growth in direct tax collections, particularly income tax, has been robust in recent years (see box below) but may see some moderation next fiscal due to the increased threshold. The government is expecting to forgo Rs 1 lakh crore in direct tax revenue. That said, corporate tax collections are expected to pick up from a low base, and growth in GST collections is anticipated to maintain its momentum. This will be supported by an expected increase in consumption as inflation eases, monetary policy becomes more accommodative, and the effects of the income tax rebate flow in.
Composition of tax revenue by key sources
|
Growth
(% y-o-y) |
Tax
buoyancy |
||||||||
|
FY16-FY20 (Avg) |
FY23-FY24 (Avg) |
FY25 RE |
FY26BE |
FY16-FY20 (Avg) |
FY23-FY24 (Avg) |
FY25RE |
FY26BE |
||
|
Total |
Gross tax revenue |
10.3 |
13.1 |
11.2 |
10.8 |
0.9 |
1.1 |
1.1 |
1.1 |
|
Direct tax |
Corporate |
6.1 |
13.2 |
7.6 |
10.4 |
0.4 |
1.1 |
0.8 |
1.0 |
|
Income |
13.4 |
22.5 |
20.3 |
14.4 |
1.3 |
2.0 |
2.1 |
1.4 |
|
|
Indirect tax |
GST |
17.2 |
17.2 |
10.9 |
10.9 |
1.7 |
1.4 |
1.1 |
1.1 |
|
Excise |
9.1 |
-11.7 |
-0.1 |
3.9 |
0.9 |
-0.9 |
0.0 |
0.4 |
|
|
Customs |
-7.9 |
8.0 |
0.8 |
2.1 |
-0.8 |
0.7 |
0.1 |
0.2 |
|
Note: Tax
buoyancy numbers for FY26 are based on the government's nominal GDP growth
assumption of 10.1%.
Source: Budget documents, CEIC, Crisil
- Non-tax revenue target bakes in a pick-up in dividend from the RBI: The government has budgeted a significant dividend of Rs 2.6 lakh crore (9.3% increase year-on-year) from the Reserve Bank of India (RBI) and other financial institutions for next fiscal. This substantial dividend is largely attributed to the gains accrued from foreign exchange transactions aimed at stabilizing the rupee. As a result, non-tax revenues are expected to witness a healthy growth of 9.8% next fiscal, compared with the revised estimate for this fiscal, providing a notable boost to the government's revenue streams.
- Revenue expenditure growth to moderate even as capex thrust is maintained: The government has allocated Rs 39.4 lakh crore for revenue expenditure next fiscal, marking a 6.7% increase from the revised estimate for the current fiscal. However, as a percentage of GDP, revenue expenditure is expected to decline to 11% from 11.4%, driven by a reduction in the share of food, fertiliser, and pension expenditure in the country's GDP. Despite this decrease, the focus on capital expenditure remains unchanged, with the allocation for capex remaining at the same level (as a percentage of GDP) as this fiscal. This underscores the administration's continued commitment to invest in the country's infrastructure and growth initiatives.
- Disinvestment targets remain a challenge: For next fiscal, the government has set a budget target of Rs 0.47 lakh crore, 42% higher than the revised estimate for this fiscal.
How fiscal deficit will be financed:
The government plans to finance 73.5% of its fiscal deficit through dated government securities (G-secs) and 21.9% through small savings in fiscal 2026, with other sources contributing a smaller amount. The reliance on G-secs is expected to remain stable, while dependence on small savings may decline. Gross market borrowing is expected to increase slightly to Rs 14.8 lakh crore in fiscal 2026, driven by rising repayments on previous borrowings, despite a reduction in the fiscal deficit.
|
Fiscal
deficit is primarily financed by G-secs |
Fresh
G-sec borrowing has risen, factoring imminent repayments |
|
|
|
Note:
Other receipts refer to funds from internal debt and public account
Source: Ministry of Finance, budget documents, Crisil
Key announcements and takeaways for capital markets
|
Category |
Announcement |
Key takeaway |
Impact |
|
AIF |
Supported by the fund of funds set up with a government contribution of Rs 10,000 crore, the AIFs for start-ups have received commitments of over Rs 91,000 crore. Now, a new fund of funds, with expanded scope and a fresh contribution of another Rs 10,000 crore will be set up. Category I and Category II
AIFs are undertaking investments in infrastructure and other such sectors.
Certainty of taxation is proposed to these entities on gains from securities |
The initiatives aimed at Alternative
Investment Funds (AIFs) are expected to provide a significant boost to the
infrastructure and related sectors, which are vital for the country's growth
and development. Additionally, the tax relief on gains from securities under
Category I and Category II AIFs is likely to stimulate increased activity in
this space, fostering a more vibrant and dynamic investment environment. |
Positive |
|
Pension and insurance |
A forum for regulatory coordination and development of pension
products will be set up The foreign direct investment limit for the insurance sector will be
raised to 100% from 74%. This enhanced limit will be available for companies
that invest the entire premium in India. The current guardrails and
conditionalities associated with foreign investment will be reviewed and
simplified |
The establishment of a common forum for pension products will
facilitate enhanced monitoring and oversight of the industry. Furthermore,
the increase in the foreign direct investment (FDI) limit to 100% from 74% is
expected to attract more international players to the market, as it
eliminates the requirement for foreign investors to secure Indian partners.
This move is anticipated to boost competitiveness, facilitate the transfer of
technology, and improve India's business environment, ultimately leading to
the creation of new job opportunities, potentially lower insurance premiums,
and the adoption of global best practices by Indian insurers, driving
innovation and the implementation of cutting-edge technologies. |
Positive |
|
Power sector reforms |
Electricity distribution
reforms and augmentation of intra-state transmission capacity by states will
be incentivised. This will improve financial health and capacity of
electricity companies. Additional borrowing of 0.5% of gross state domestic
product (GSDP) will be allowed to states contingent on these reforms |
The government has allowed
for an additional borrowing of 0.5% of the Gross State Domestic Product
(GSDP), similar to the previous year, which may lead to increased issuances
in the future. This move is reminiscent of the fiscal 2025 policy, where
states were permitted to borrow an additional 0.5% of their GSDP, amounting
to Rs 1,56,619 crore, provided they demonstrated satisfactory performance in
the power sector |
Neutral |
|
Support to states for infrastructure |
An outlay of Rs 1.5 lakh crore is proposed for the 50-year interest
free loans to states for capital expenditure and incentives for reforms |
The provision of an interest-free loan of Rs 1.5 lakh crore to states
on a long-term basis is expected to decrease their reliance on borrowing from
the primary market. As states are likely to utilise this loan facility before
seeking funds from the primary market, it will lead to a reduction in their
borrowing needs, ultimately resulting in a narrowing of the state spread over
the next quarter. |
Positive |
|
Credit enhancement facility
by NaBFID |
NaBFID will set up a partial
credit enhancement facility for corporate bonds, for infrastructure |
The National Bank for
Financing Infrastructure and Development (NaBFID) is set to play a
significant role in boosting infrastructure bond issuances, which have
already seen a notable volume of around Rs 150,000 crore over the past three
years. Through various strategic initiatives, NaBFID will facilitate access
to bond financing for lower-rated bonds, reducing their reliance on bank
funding and promoting a more diversified funding landscape. However, the
success of NaBFID in becoming a key player in infrastructure financing will
depend on the responsiveness of regulatory frameworks and the implementation
of market development initiatives. Meanwhile, the announcements related to
infrastructure and the power sector are expected to have a positive impact on
the corporate bond market, as they will lead to a reduction in the supply of
government securities and state development loans, thereby increasing demand
for corporate bond issuances. |
Positive |
|
Urban Challenge Fund |
The government will set up an Urban Challenge Fund of Rs 1 lakh crore
to implement the proposals for cities as growth hubs, creative redevelopment
of cities and water and sanitation announced in the July 2024 budget This fund will finance up to 25% of the cost of bankable projects with
a stipulation that at least 50% of the cost is financed from bonds, bank
loans, and public-private partnerships (PPPs). An allocation of Rs 10,000 crore is
proposed for fiscal 2026 |
The government has mandated that each ministry responsible for
infrastructure development will create a three-year pipeline of projects that
can be executed through bond financing or Public-Private Partnership (PPP)
models, aiming to streamline and accelerate infrastructure development
through innovative funding mechanisms. |
Neutral |
Impact of budget on yields
|
Asset Class |
Tenor (Years) |
Closing
yields |
Opening
Yields |
Change |
|
G Sec* |
5-year |
6.67% |
6.64% |
-0.03% |
|
10-year |
6.69% |
6.67% |
-0.02% |
|
|
SDL* |
5-year |
7.03% |
7.03% |
0.00% |
|
10-year |
7.09% |
7.08% |
-0.01% |
|
|
Corporate Bonds |
5-year |
7.39% |
7.34% |
-0.05% |
|
10-year |
7.18% |
7.18% |
0.00% |
Note:
*Semi annualised yields
Source: Crisil Intelligence
Personal taxation
The government has continued to ease the tax burden on the middle class by introducing a new regime, under which individuals with incomes up to Rs 12 lakh will be exempt from paying income tax, excluding special rate income such as capital gains. Furthermore, considering the standard deduction of Rs 75,000, the tax-exempt limit will be effectively raised to Rs 12.75 lakh for salaried taxpayers, providing them with additional tax relief and increasing their disposable income.
Income tax slabs – new regime (July 2024 vs proposed in latest budget)
|
|
||||||||||||||||||||||||||||||
|
Source: Budget
documents, Crisil Intelligence
|
|
Impact
Individuals with an annual income of Rs 12,75,000 will experience a significant tax benefit of Rs 83,200 under the new tax regime set to take effect in July 2024, compared to the previous system. Meanwhile, those who do not qualify for this specific benefit will still see an increase in their net cash in hand due to the revised tax slabs in the new regime. The maximum increase in net cash in hand will be capped at Rs 1,14,400 per annum, applicable to individuals with annual incomes exceeding Rs 24,75,000. This change is expected to provide a welcome boost to individuals across various income categories, putting more money in their pockets and potentially stimulating economic growth
|
Annual income (Rs) |
Tax payable in |
Tax payable in |
Tax savings |
|
12,75,000 |
83,200 |
0 |
83,200 |
|
14,00,000 |
1,09,200 |
81,900 |
27,300 |
|
16,00,000 |
1,53,400 |
1,13,100 |
40,300 |
|
18,00,000 |
2,15,800 |
1,50,800 |
65,000 |
|
20,00,000 |
2,78,200 |
1,92,400 |
85,800 |
|
22,00,000 |
3,40,600 |
2,40,500 |
1,00,100 |
|
24,75,000 |
4,26,400 |
3,12,000 |
1,14,400 |
|
26,00,000 |
4,65,400 |
3,51,000 |
1,14,400 |
|
28,00,000 |
5,27,800 |
4,13,400 |
1,14,400 |
|
30,00,000 |
5,90,200 |
4,75,800 |
1,14,400 |
Source: Budget documents, Crisil Intelligence
To prevent salaried employees with annual taxable incomes slightly above Rs 12,75,000 from facing a higher tax burden, a marginal relief has been introduced. This relief is available to individuals with annual incomes up to a certain threshold, specifically Rs 13,45,588. For those earning within this range, the marginal relief will help mitigate the tax impact, ensuring that they do not end up paying more in taxes. However, it's worth noting that beyond this threshold of Rs 13,45,588, the standard tax slabs will apply, and individuals will be subject to the regular tax rates. This marginal relief aims to provide a cushion for those with modestly higher incomes, helping to maintain a fair and equitable tax system.
BFSI
Key announcements
- Loan limit under the Modified Interest Subvention Scheme (MISS) will be enhanced to Rs 5 lakh from Rs 3 lakh for loans taken through Kisan Credit Cards (KCC).
- Revamp of the PM SVANidhi scheme with enhanced loans facilities from banks and the introduction of UPI-linked credit cards with a limit of Rs 30,000.
- Allocation of Rs 3,500 crore to Interest Subsidy Scheme (ISS) under Pradhan Mantri Awas Yojana – Urban 2.0 (PMAY-U 2.0) under two categories: Rs 2,500 crore for the economically weaker section (EWS) and lower-income group (LIG) categories and Rs 1,000 crore for the middle-income group (MIG) category.
- Limit on foreign direct investment (FDI) in the insurance sector raised from 74% to 100%, subject to the investment of entire premium in India.
- Exemption of proceeds received on life insurance policy issued by IFSC insurance intermediary office without the condition on maximum premium amount.
- The TDS rate on income from investments in securitisation trusts has been reduced to 10% for all taxpayers, down from 25% for individuals and HUFs, and 30% for other entities.
- Implementation of simplified KYC process and rollout of revamped Central KYC Registry in 2025.
Impact
- The government has enhanced the Kisan Credit Card (KCC) scheme by increasing the loan limit from Rs 3 lakh to Rs 5 lakh, which is expected to benefit around 80 lakh farmers. This move aims to provide significant relief to farmers during periods of distress and enable them to access higher loan amounts at subsidised interest rates. The KCC scheme, which has approximately 7.7 crore operative accounts and a credit outstanding of Rs 9.9 lakh crore, supports around 8.21 crore farmers annually, making it a crucial initiative for the agricultural sector. The increased loan limit will help reduce the financial burden on farmers, improve their access to credit, and promote rural development.
- The Pradhan Mantri Awas Yojana - Urban 2.0 (PMAY-U 2.0) was launched in September 2024 as part of the 'Housing for All' mission, with the aim of supporting one crore urban poor and middle-class families over five years. To achieve this goal, the government has allocated Rs 3,500 crore for fiscal 2026, which will be split between the Economically Weaker Section (EWS)/Lower Income Group (LIG) and the Middle Income Group (MIG) segments.
- The allocation under the PMAY-U 2.0 scheme is expected to provide interest subsidy support of Rs 1,80,000 to beneficiaries, with a net present value (NPV) of Rs 1,50,000, over five years. This interest subsidy will help reduce the burden of housing loans on the beneficiaries, making it easier for them to own a house.
- The allocation of Rs 3,500 crore for fiscal 2026 demonstrates the government's commitment to the 'Housing for All' mission and its efforts to provide affordable housing options to the urban poor and middle-class families. The PMAY-U 2.0 scheme is expected to have a significant impact on the lives of the beneficiaries, providing them with a sense of security and dignity, and contributing to the development of the country.
- FDI in the insurance segment has gradually increased to 100% in the current budget from 26% in fiscal 2000. As of March 2024, when FDI was capped at 74%, the participation of foreign investors was as below:
- Life insurers – Of the 26 life insurance companies in India, 20 companies have a foreign partner, of which four partners hold a 74% stake in Indian companies while five partners hold between 49% and 74%.
- General and health insurers – Of the 25 general and health insurers, 13 companies have a foreign partner and five hold 49% or above.
- Specialised health insurers – Of the eight companies, only three companies have a foreign partner and two companies have a foreign holding of 49% and above.
FDI investment in the insurance segment
|
Year |
FDI limit |
FDI amount (Rs crore) |
|
FY00–FY14 |
26% |
20,858 |
|
FY14– FY21 |
49% |
34,610 |
|
FY21
onwards |
74% |
27,379 |
Source: Budget documents, Crisil intelligence
The gradual relaxation of the foreign direct
investment (FDI) limit in the insurance sector over the past decade has been
primarily aimed at increasing insurance penetration in the country. As of
fiscal 2024, India's insurance penetration stood at 3.7%, which is
significantly lower than the global average of 7%. By allowing complete foreign
ownership, the government aims to attract more foreign investment in the sector
to help bridge this gap. Foreign investors can now increase their capital
deployment in the insurance sector without being constrained by the need for a
domestic partner to contribute capital on a pro-rata basis.
- The government has announced a tax exemption for life insurance policies issued by International Financial Services Centre (IFSC) establishments, effective April 1, 2025. Previously, life insurance proceeds were tax-free only if the annual premium was below a certain limit. Now, proceeds from IFSC-issued life insurance policies will be tax-free, regardless of the premium amount.
- The tax deducted at source (TDS) rate for interest income from bonds, as per Section 193, is currently at 10%. In contrast, the TDS rate for income from investments in securitisation trusts was previously much higher, ranging from 25% to 30%. To provide relief to investors, the government has recently amended the TDS rate on income from securitisation trusts, reducing it to 10%. This reduction is anticipated to result in improved income retention for investors, making securitisation notes more appealing and potentially leading to increased investments in this asset class.
- The Central KYC Registry serves as a unified database that stores Know Your Customer (KYC) information of customers across the financial sector, facilitating standardised KYC procedures and effortless sharing of records among institutions. By maintaining a centralised repository, the registry streamlines the KYC process, eliminating the need for customers to repeatedly submit and verify documents when establishing new accounts or relationships with financial entities. This, in turn, substantially reduces the costs and operational complexities associated with KYC registration and data maintenance for financial institutions. Furthermore, the registry provides institutions with real-time updates on any changes to KYC details, thereby enhancing efficiency, compliance, and reducing the risk of errors or inconsistencies.
- The budget is expected to have a positive impact on the banking sector, particularly in areas such as MSMEs, agriculture, and housing. Additionally, tax reforms will increase disposable income and consumption, benefiting sectors like FMCG, auto, and consumer durables. The tax exemption on salaries and bank deposit interest is expected to boost household savings, which may be invested in bank deposits, supporting deposit growth. Overall, the combination of increased consumption and deposit growth is likely to lead to higher credit offtake, ultimately benefiting the financial services sector
Textile
Key announcements
- Five-year Mission for Cotton Productivity introduced to enhance cotton farm productivity and sustainability by giving farmers access to cutting-edge technology
- BCD rate on knitted fabrics, covered by nine tariff lines, revised from 10/20% to 20% or Rs 115 per kg, whichever is higher
- The government has increased the allocation of production linked incentives (PLI) scheme for textile to Rs 1,148 crore from Rs 45 crore in earlier years. Positive for textile companies.
MSME
Key announcements
- Credit
guarantee cover enhanced:
- Rs 10 crore for micro and small
enterprises from Rs 5 crore, leading to additional credit of Rs 1.5 lakh crore
over 5 years
- Rs 20 crore for startups (from Rs
10 crore), with a guarantee fee of 1% for loans in 27 focus sectors
- Rs 20 crore for well-run exporter MSMEs, for term loans
- The investment and turnover limits for classification of all MSMEs will be enhanced to 2.5 and 2 times respectivel
- The period of incorporation for startups has been extended by five years, until 2030
Infrastructure
Key announcements
The Jal Jeevan Mission (JJM) has been extended until 2028, with an enhanced total outlay, aiming to achieve 100% coverage of potable tap water connections across rural households. JJM has been allocated Rs 67,000 crore, marking a significant increase from the revised estimates of Rs 22,694 crore in 2024-25 The budgetary capital expenditure for infrastructure ministries* is Rs 10.7 lakh crore, up 11.6% from fiscal 2025RE.
Shipping:
A Maritime
Development Fund of Rs 25,000 crore will be set up to provide long-term
financing to the maritime sector. The government will contribute up to 49%,
while ports and the private sector will mobilise the rest.
Aviation:
A new modified UDAN
scheme will be launched to enhance regional connectivity to 120 new
destinations and carry 4 crore passengers in the next 10 years. Additionally,
greenfield airports will be facilitated in Bihar to meet future needs of the
state
Agriculture and
allied sectors:
Key announcements
- The outlay for the Ministry of Agriculture and Farmers' Welfare dipped ~3% for fiscal 2026BE, compared with fiscal 2025RE. Allocation under schemes supporting sustainability, holistic agriculture development, climate resilience and post-harvest management witnessed growth ranging from 8% under the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) to 42% in case of Rashtriya Krishi Vikas Yojana (RKVY). However, allocation under the Pradhan Mantri Fasal Bima Yojana plunged 23%.
- The Ministry of Agriculture and Farmers' Welfare also introduced several schemes aimed towards comprehensive planning for fruits, vegetables and cotton, cultivation of makhana, high-yielding seed varieties and reducing import dependence for pulses, with a combined corpus of ~Rs 2,200 crore.
- The Ministry of Fisheries, Animal Husbandry and Dairying saw a 37% jump in allocation for fiscal 2026BE, compared with fiscal 2025RE. The Department of Fisheries received a substantial fillip (62% over fiscal 2025RE) following the announcement of the Fisheries and Aquaculture Infrastructure Development Fund introduced to aid the development of infrastructure in marine and inland fisheries. The outlay for Pradhan Mantri Matsya Sampada Yojana grew to Rs 2,465 crore for fiscal 2026 from Rs 1,500 crore for fiscal 2025 RE
Manufacturing
The announcements can be classified under four broad areas aimed at improving competitiveness, enhancing participation in the global value chain, attracting investments, increasing employment generation and providing continued support for sectors identified under the Production Linked Incentive (PLI) scheme.
Emerging sectors
India's National Manufacturing Mission under the Make in India programme focuses on clean technology manufacturing to establish a robust ecosystem for emerging industries, including solar PV cells, EV batteries and renewable energy equipment. It seeks to drive import substitution and augment domestic manufacturing. Exemption of BCD on 35 capital goods for EV battery manufacturing and 28 capital goods for mobile phone battery manufacturing. Complete exemption of BCD on cobalt powder and waste, scrap of lithium-ion battery, lead, zinc and 12 critical minerals, in addition to the 25 critical minerals exempted in the budget last year. As part of the mining reforms, a policy is expected to be introduced that focuses on the recovery of critical minerals from tailings (waste materials left after the extraction and processing of minerals from ore)
Skilling
Five National Centres of Excellence for skilling to equip the youth with skills to cater to global manufacturing demands
Investment
Friendliness Index of States
An Investment Friendliness Index of States to be launched in 2025 to further the spirit of competitive cooperative federalism.
PLI schemes
Incremental allocation to PLI schemes across sectors such as electronics, textiles, automobiles and components, adding up to Rs 17,517 crore, aligns with the government's focus on spurring private investments.
Power and renewable energy
- The government will set up a National Manufacturing Mission covering small, medium and large industries to bolster the 'Make in India' initiative, providing policy support, execution road maps, and a governance and monitoring framework for central ministries and states. The mission will also support clean tech-related manufacturing. The aim is to improve domestic value addition and build an ecosystem for solar photovoltaic (PV) cells, electric vehicle (EV) batteries, motors and controllers, electrolysers, wind turbines, very high voltage transmission equipment and grid scale batteries.
- The budget proposes to develop at least 100 GW of nuclear energy by 2047 to support the country's energy transition efforts. For an active partnership with the private sector towards this goal, the government plans to amend the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. A Nuclear Energy Mission for research and development of small modular reactors (SMR) with an outlay of Rs 20,000 crore will be set up. At least five indigenously developed SMRs will be operationalised by 2033.
Housing and real estate
Key announcements
- To expedite the completion of 1 lakh more dwelling units, the government has established the second tranche of the Special Window for Affordable and Mid-income Housing (SWAMIH) Investment Fund, or SWAMIH 1 1 , through blended finance.
- Homeowners can now claim a nil-tax benefit on up to two self-occupied properties without any pre-conditions, thereby easing the compliance burden
Tourism
Key announcements
- Develop 50 prominent tourist destinations across the country.
- Hotels set up at these destinations to be granted infrastructure status under the harmonised master list
- Extend Mudra loans to homestay businesses
- Waive visa fees for certain international tourist groups
- Boost medical tourism under the 'Heal in India' initiative through government and private sector partnerships
Conclusion
- The budget reaffirms the government's commitment to capital expenditure, ensuring states have financial means to invest in infrastructure through continued provision for long-term, interest-free loans. Additionally, significant steps have been taken to enhance the ease of doing business, including the establishment of a High-Level Committee of Regulatory Reforms to streamline non-financial sector regulations, certifications, licenses, and permissions. This move is expected to reduce bureaucratic hurdles and encourage entrepreneurship, leading to increased investment and job creation.
- Overall, the budget strikes a pragmatic balance between immediate economic support and long-term fiscal sustainability, positioning India on a steady path toward growth and resilience. The focus on infrastructure development and ease of doing business is likely to have a positive impact on the country's economic growth, making it an attractive destination for domestic and foreign investors. Furthermore, the government's commitment to fiscal discipline and long-term sustainability will help to maintain investor confidence and ensure that the country's economic growth is stable and sustainable.
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