Industry leaders commend Nirmala Sitharaman’s vision for growth

Finance Minister Nirmala Sitharaman has managed to provide significant income tax relief to common citizens, support medium and small scale enterprises (MSMEs) and startups, announce a set of friendly policies to benefit export growth, agriculture, climate friendly industries, tourism and a handful of other sectors, in a fiscally prudent Union Budget 2025-26 presented in the Parliament today.

The Revised Estimate of the fiscal deficit for 2024-25 is 4.8 % of GDP (as against 5.6 % in 2023-24) with a plan to bring it down further to 4.4% in 2025-26.

The Revised Estimate of the total receipts other than borrowings for 2024-25 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 for FY25 is Rs 47.16 lakh crore,of which the capital expenditure is about Rs 10.18 lakh crore. For 2025-26, the government estimates the comparable receipts and expenditure to be Rs 34.96 lakh crore and Rs 50.65 lakh crore respectively. Even after forgoing about Rs 1 lakh crore in direct taxes due to income tax cut, the net tax receipts in 2025-26 are estimated at Rs 28.37 lakh crore.

“The budget gives a simultaneous boost to the government’s steadfast record of post-pandemic fiscal discipline, while also addressing the slump in urban consumption by offering income tax concessions to the middle class, while retaining the broad focus on capex, manufacturing, and exports. The fiscal wizardry of the numbers has been the ability to cut fiscal deficit from 4.8% of GDP in FY25 to 4.4% of GDP in FY26, while simultaneously announcing income tax concessions and retaining a decent public investment outlay”, Aurodeep Nandi, India Economist, Nomura said. According to Nandi, “Much of this has been possible on the back of a bonanza of RBI dividends and expectations of healthy income tax collections. Overall, the budget is in line with our expectations, and the fiscal prudence keeps India’s fiscal risk premia low. It should provide greater legroom to the RBI to begin lowering its policy rate at the February MPC”.

The distinctive feature of the Budget will be its attempt to push consumption demand in the economy by providing tax relief to the citizens with a person with an income of up to Rs 12 lakh required to pay zero tax. For an income of Rs 25 lakh, there will be a tax benefit of Rs 1,10,000 or 25% of the tax payable as per existing rates today. The measure is expected to spur one major component of GDP – consumption – which was lagging for some time now.

Of the four key engines of economic growth, government spending was the most robust since Covid-19 pandemic. Private investments were not growing in the same pace, exports were not outperforming. Private consumption, which the government hopes to have fixed today, was what needed help the most. Union Budget has also announced a series of measures meant to push exports while PLI schemes are meant to incentivise private investment. The launch of the Rs 1 lakh crore urban challenge fund is also expected to help build urban infrastructure, promote demand, employment, and crowd in private investment.

“The Union Budget 2025-26 provides a strong and convincing template for boosting growth and generating jobs, the twin imperatives for our economy today, with targeted interventions towards facilitating inclusive development. The policy choices made to facilitate powerful engines such as agriculture, MSME, investment and exports by way of reforms in six domains, in collaboration with states, is welcome”, said Sanjiv Puri, President, Confederation of Indian Industry (CII).

“The Budget proposals will re-energise the economy by lifting the sentiments of the middle class and nudging the private sector to advance its investment plans as demand improves across sectors,” Harsha Vardhan Agarwal, President, FICCI said.

The Finance Minister states that the Budget aims to initiate transformative reforms across six domains – taxation, power sector, urban development, mining, financial Sector and regulatory reforms - which will augment the country’s growth potential and global competitiveness in the next five years. A High-Level Committee for Regulatory Reforms is to be set up for a review of all non-financial sector regulations, certifications, licenses, and permissions 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.

The minister has also announced that an Investment Friendliness Index of States will be launched in 2025 and a mechanism will be set up under the Financial Stability and Development Council to evaluate impact of the current financial regulations and subsidiary instructions. A Jan Vishwas Bill 2.0 to decriminalize more than 100 provisions in various laws is another announcement made by the minister in her Budget speech.

These announcements have not just budgetary implications for FY26, but it can also have a long-term impact on India’s economic growth. That’s what makes Union Budget 2025-26 interesting.