Critical Analysis of Union Budget 2025

The Union Budget 2025 presents a mix of ambitious reforms, fiscal prudence, and sector-specific incentives. While it introduces significant tax reliefs, infrastructure expansion, and targeted employment generation, there are concerns regarding fiscal consolidation, implementation challenges, and potential economic implications. Let’s take a look at the budget’s major aspects.

Taxation & Fiscal Consolidation

Positives:

✅ Income Tax Relief – Raising the income tax exemption limit to ₹12 lakh is a significant move that boosts disposable income and encourages consumption. It also simplifies tax filing for middle-class taxpayers.

✅ Simplification of TDS/TCS – Reducing compliance burden will encourage investment and ease financial transactions.

Concerns:

❌ Fiscal Deficit Concerns – While the government aims to reduce fiscal deficit to 4.4% of GDP (from 4.8%), its ambitious expenditure on welfare schemes and infrastructure raises concerns about how revenue shortfalls will be covered. More details on deficit financing are needed.

❌ New Tax Code Uncertainty – The budget proposes a new tax law next week, creating uncertainty about potential long-term tax regime changes. Businesses and investors may delay decisions until further clarity emerges.

Agriculture & Rural Development

Positives:

✅ Dhan Dhanya Yojana & Credit Expansion – Enhancing the Kisan Credit Card limit to ₹5 lakh will improve access to credit for farmers and boost agricultural productivity. The six-year pulses mission will help reduce import dependency.

✅ Expansion of Agro-Based Sectors – Establishing a Makhana Board in Bihar and increased government purchase of pulses ensure price stability for farmers.

Concerns:

❌ No Major Structural Reforms – While subsidies and credit expansion are beneficial, there is no significant land reform policy or market-linked agricultural pricing mechanism, which are critical for long-term growth.

❌ MSP & Procurement Uncertainty – The budget lacks clarity on whether the government will increase Minimum Support Prices (MSP) or sustain large-scale procurement programs.

Infrastructure & Urban Development

Positives:

✅ ₹11.11 Lakh Crore Capex Allocation – This is a continuation of the government’s infrastructure-driven growth strategy, expected to boost sectors like cement, steel, and construction.

✅ Urban Challenge Fund (₹1 Lakh Crore) – Encouraging states to revamp cities and water sanitation through competitive grants is an innovative governance approach.

Concerns:

❌ Execution Bottlenecks – Infrastructure projects in India often face delays due to land acquisition issues, environmental clearances, and bureaucratic red tape. The budget does not specify how these hurdles will be addressed.

❌ Dependence on States – Many urban reforms (e.g., affordable housing, transport) require state-level cooperation. With differing political alignments, implementation may be slow.

Financial Sector Reforms

Positives:

✅ 100% FDI in Insurance – This reform is expected to bring global players into India’s insurance market, increasing competition and expanding coverage.

✅ MSME Credit Support – Enhancing credit guarantees for small businesses (₹5 lakh limit on micro-enterprise credit cards) will improve liquidity and boost entrepreneurship.

Concerns:

❌ Banking Sector Risks – While increased credit guarantees help businesses, they also increase the risk of NPAs (Non-Performing Assets) if borrowers fail to repay. India’s banking sector already struggles with bad loans.

❌ Lack of Direct Support for NBFCs – Many Non-Banking Financial Companies (NBFCs) play a key role in credit distribution, but the budget does not offer specific relief or funding for them.

Energy & Sustainability

Positives:

✅ 100 GW Nuclear Energy Plan – This ambitious target will help India reduce coal dependency and transition to cleaner energy.

✅ Exemptions for EV & Battery Sector – Removing import duties on lithium-ion batteries will reduce costs for electric vehicle (EV) manufacturers, making EVs more affordable.

Concerns:

❌ Delayed Renewable Energy Transition – The focus on nuclear energy over solar and wind raises concerns, as nuclear projects take decades to implement, whereas solar & wind can be scaled faster.

❌ Lack of Carbon Taxation – Despite global emphasis on carbon credits and emission reduction, the budget does not introduce incentives for green financing or carbon pricing.

Employment & Skill Development

Positives:

✅ 22 Lakh Jobs in Leather & Footwear – This initiative will boost exports and create employment in labor-intensive manufacturing.

✅ AI Research & Digital Education – Allocating ₹500 crore for AI in education is a forward-thinking move, helping India compete in global AI advancements.

Concerns:

❌ Unclear Job Creation Strategy – The budget mentions job creation but does not provide a structured employment generation roadmap. India needs 90 lakh jobs annually to absorb its workforce, but these initiatives may not be enough.

❌ Limited Focus on Women’s Employment – While there is a special scheme for women from backward classes, there is no large-scale initiative for urban working women or gender wage parity.

Fiscal Discipline & Debt Management

Positives:

✅ Lower Fiscal Deficit Target – Reducing fiscal deficit to 4.4% of GDP signals the government’s intent to maintain economic discipline.

Concerns:

❌ Borrowing Dependency – The government plans to borrow ₹11.5 trillion, raising concerns about rising interest payments and debt sustainability.

❌ Revenue Assumptions May Be Optimistic – The budget assumes high tax collections and disinvestment targets, but global economic uncertainties (geopolitical tensions, slowing growth) may impact revenue.

Final Verdict: A Balanced but Risky Budget

✅ Strengths

• Pro-Growth & Investment-Oriented: Focus on infrastructure, MSME credit, and nuclear energy will drive long-term growth.
• Taxpayer-Friendly: Raising tax exemption limits will boost disposable income.
• Sector-Specific Support: Agriculture, rural development, and manufacturing sectors receive targeted incentives.

❌ Weaknesses

• Fiscal Risks: Revenue assumptions are optimistic, and high government borrowing raises concerns.
• Execution Challenges: Many reforms require state cooperation & bureaucratic efficiency.
• Limited Social Sector Reforms: Health, women’s employment, and education need stronger policy interventions.

Rating: 7.5/10

*Disclaimer: Views expressed are author’s personal and based on initial interpretation and understanding of budget before further addendums and explanations given by the government