Union Budget 2025: How India’s new fiscal plan reshapes growth and middle-class benefits

Union Minister for Finance and Corporate Affairs Nirmala Sitharaman has unveiled the much-anticipated Union Budget 2025, marking a decisive shift towards fiscal consolidation while prioritising growth. The budget presents a comprehensive economic growth strategy, focusing on tax reforms, infrastructure expansion, industrial development, and incentives for micro, small, and medium enterprises (MSMEs). With a strong emphasis on middle-class benefits, the new tax regime, increased public investment, and targeted sectoral support are set to accelerate economic recovery and long-term stability.

The government’s fiscal approach balances the need for higher capital expenditure with fiscal prudence. The budget targets a fiscal deficit reduction to 4.4% of GDP in FY-26 while allocating ₹50.65 lakh crore in total spending, reflecting a commitment to sustainable economic management.

How will the new income tax regime impact middle-class savings?

One of the most notable announcements in the Union Budget 2025 is the significant revision of personal income tax slabs, aimed at boosting disposable income for individuals and families. Under the new tax regime, no income tax is levied on annual earnings up to ₹12 lakh. For salaried individuals, a standard deduction of ₹75,000 further extends the tax-free limit to ₹12.75 lakh per annum.

This historic tax relief is expected to provide immediate financial relief to millions of taxpayers, stimulate household consumption, and contribute to overall economic momentum. Additionally, the government has eased tax compliance, increasing the TDS threshold on rent from ₹2.4 lakh to ₹6 lakh and extending the deadline for updated tax returns from two to four years.

The broader implications of these changes suggest an increase in consumer spending, which could fuel demand in key sectors such as real estate, automotive, and retail. The revised tax structure aligns with the government’s vision of empowering the middle class while maintaining fiscal discipline.

How does the budget strengthen India’s agricultural sector?

The economic growth strategy outlined in the Union Budget 2025 places a strong emphasis on the agricultural sector, recognising its role as a backbone of the economy. The Prime Minister Dhan-Dhaanya Krishi Yojana has been introduced to support farmers in 100 low-productivity districts, focusing on improved irrigation, post-harvest storage, and enhanced credit access.

A six-year Mission for Aatmanirbharta in Pulses aims to increase domestic production of Tur, Urad, and Masoor, reducing dependency on imports. The government has committed to purchasing pulses through NAFED and NCCF, ensuring price stability and market security for farmers.

To strengthen rural financial inclusion, the Kisan Credit Card (KCC) scheme has been expanded, raising the loan limit from ₹3 lakh to ₹5 lakh. The National Cotton Productivity Mission also receives a boost, focusing on high-yield cotton varieties to enhance production and global market competitiveness.

These targeted interventions are expected to improve farmer incomes, stabilise food supply chains, and create employment opportunities in allied rural industries.

How will MSMEs benefit from Union Budget 2025?

Recognising MSMEs as a key driver of economic growth and employment, the government has introduced multiple incentives in the Union Budget 2025 to enhance productivity, financial inclusion, and global competitiveness.

The credit guarantee cover for MSMEs has been doubled from ₹5 crore to ₹10 crore, making it easier for small businesses to access capital. A National Manufacturing Mission has been launched to support enterprises under the “Make in India” initiative, fostering industrial self-sufficiency.

In a significant move towards inclusivity, the budget also introduces a scheme offering ₹2 crore loans to five lakh first-time entrepreneurs from Scheduled Castes, Scheduled Tribes, and women-led businesses. This initiative aims to expand entrepreneurship and employment in traditionally underrepresented communities.

Additionally, India’s toy manufacturing sector is set to receive dedicated government support, strengthening domestic production and reducing reliance on imports. The focus on MSMEs underscores the government’s strategy to position India as a global manufacturing hub while fostering job creation.

What are the major infrastructure and urban development plans?

Infrastructure development remains central to the Union Budget 2025, with a substantial increase in capital expenditure. The ₹1 lakh crore Urban Challenge Fund has been introduced to drive urban renewal, sanitation projects, and smart city developments, positioning cities as key economic hubs.

Public-Private Partnerships (PPPs) will play a significant role, with ministries unveiling a three-year pipeline of infrastructure projects. The SWAMIH Fund 2, with an allocation of ₹15,000 crore, will fast-track the completion of one lakh stressed housing units, addressing real estate bottlenecks.

The aviation sector receives a boost with the Modified UDAN Scheme, which will enhance regional air connectivity by adding 120 new airports. Additionally, the government is investing ₹20,000 crore in nuclear energy research, supporting the development of Small Modular Reactors (SMRs) for sustainable power generation.

These strategic infrastructure investments are expected to generate employment, attract private sector investment, and improve urban living standards across India.

How does the budget promote technology, education, and research?

The Union Budget 2025 places significant emphasis on innovation, education, and digital transformation. To strengthen STEM education, 50,000 Atal Tinkering Labs will be set up in government schools over the next five years.

A Centre of Excellence in Artificial Intelligence, with a ₹500 crore budget, will drive AI-based educational solutions, positioning India at the forefront of global technology advancements. The Bharatiya Bhasha Pustak Scheme will enhance digital access to Indian language textbooks, benefiting students in rural and urban areas alike.

Additionally, the National Geospatial Mission will develop critical infrastructure for urban planning, land records, and disaster management, ensuring efficient governance and resource allocation.

By investing in education and research, the government aims to equip the workforce with future-ready skills and drive long-term innovation-led growth.

What are the key fiscal and financial sector reforms?

Maintaining fiscal prudence while enabling growth remains a cornerstone of the Union Budget 2025. The fiscal deficit target has been set at 4.4% of GDP, down from 4.8% in the previous fiscal year.

The budget also proposes raising the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%, attracting greater foreign capital inflows. Additionally, the newly introduced BharatTradeNet Initiative aims to streamline international trade documentation, enhancing export efficiency.

In the financial sector, reforms focus on compliance simplification, digital transactions, and investment-friendly policies to strengthen India’s position as a global financial hub.

How does Union Budget 2025 set the stage for long-term growth?

The Union Budget 2025 delivers a strategic roadmap for middle-class benefits, industrial expansion, and infrastructure development while maintaining fiscal discipline. With bold tax reforms, higher public investment, and targeted sectoral support, the budget is expected to accelerate economic momentum and strengthen India’s global standing.

By balancing growth with fiscal responsibility, the government reinforces its commitment to long-term economic sustainability, making this budget a defining moment for India’s financial future.