The 2025 budget provides a roadmap for India’s journey toward global economic leadership – on its own terms, in its own way. An approach that is familiar but distinctly Indian. During the pandemic, when the world urged massive stimulus spending, India took a measured path – prioritising macroeconomic stability over short-term gains. The result? Inflation remained under control, the economy rebounded strongly, and growth accelerated while many advanced economies grappled with stagflation. This year’s Union Budget signals the same intent – to chart an independent course rooted in domestic realities rather than borrowed blueprints. It balances short-term consumption boosting medium-term support for private investments and long-term structural investments in futuristic sectors while keeping an eye on fiscal prudence.
Putting more money in the hands of people to boost consumption
India is a market everyone wants to tap – one of the few large economies where domestic consumption accounts for more than half of its GDP. Policymakers have read the economic signals well – while the top 5% of income groups have seen a decline in consumption, rural consumption has been rising with average monthly spending up by 9.3%. The announcement of zero income tax up to ₹12 lakh will inject significant spending power into the lower and middle-income segments. This restructuring which foregoes ₹1 lakh crore of government revenue, is a calculated move – aimed at stimulating household consumption, savings, and investment in the short run while hopefully engendering increased income tax filings going forward.
And to help offset revenue forgone through tax cuts, asset monetisation makes a comeback. This will ensure fiscal prudence, maintained even as the government continues investing in infrastructure, digital expansion, and human capital development.
Driving investments and global competitiveness
India’s growth story is incomplete without its MSMEs, and this budget alludes to an Ease of Doing Business 2.0 with an MSME focus. Increasing investment and turnover limits by 2.5x and 2x, respectively, will ease the working capital pressure allowing MSMEs to scale up. Easier loan terms and the introduction of customised credit cards with a ₹5 lac limit for micro-enterprises registered on the Udyam portal shall further ease access to finance.
Recognising business readiness to take India to the next stage of global competitiveness, the budget lays the groundwork for broader regulatory reform. A high-level committee will review compliance burdens, and an investor-friendly index will rank states on business-friendliness – fostering healthy competition to attract investment.
While these are early signals rather than immediate structural changes, they set the stage for MSMEs to become true engines of employment and growth. Enabling businesses to invest in people, productivity-enhancing assets and expansion strategies, these measures hold the promise of more jobs, better wages, and stronger consumption – fuelling a virtuous cycle of economic dynamism.
While the budget maintains a near-identical allocation to public capital expenditure via-a-vis last year, the government has subtly shifted its focus to catalysing private sector investment. Import duty reductions for critical inputs, incentivise labour-intensive export sectors like textiles and leather, and a 108% increase in outlay for Production-Linked Incentive (PLI) schemes, pointing to a strategy aimed at boosting industrial output and job creation. The budget pertinently signals that Indian businesses are ready to drive the next phase of economic expansion, and the government will facilitate rather than dictate this process.
Investing in sectors of the future
Beyond immediate growth measures, the budget lays the foundation for long-term structural transformation by prioritising investment in deep-tech, productivity-enhancing industries. Measures like extending presumptive taxation to non-resident firms establishing electronics manufacturing units in India are slated to boost high-value exports, an area where India lags. The full exemption of Basic Customs Duty (BCD) on cobalt powder, lithium-ion battery waste, and 12 other critical minerals is another strategic move, ensuring supply chain resilience for green technology firms.
The government’s approach to AI also resonates with this thinking with the Economic Survey 2025 highlighting AI’s transformative potential across banking, insurance, healthcare, telecom, retail, and transport. With these announcements, the budget signals to the private sector that these are the industries set to shape India’s future growth. And hence are the ones to invest in.
Net-zero: The India Way
India’s climate strategy remains distinct from that of developed nations, focusing simultaneously on mitigation and adaptation, a way to green financing. As per CEA, economic growth is seen as a vehicle for climate resilience, generating the financial resources needed to combat climate change effectively.
At the same time, the budget underscores the importance of securing India’s position in the green energy supply chain. While the world remains heavily dependent on China for critical minerals essential for solar panels, EVs, and other green technologies, India’s policy moves signal a clear intent to reduce this reliance. The ₹ 20,000 crore allocation for R&D in Small Modular Reactors (SMRs) lays the ground for a future where energy security is intertwined with the concerns of sustainability.
Charting its own course: The budget’s message for growth
By pairing immediate consumption support with structural reforms and long-term investments, the government is fostering a conducive environment where businesses can thrive, industries can scale, and citizens can prosper. The roadmap is clear – unlock domestic potential, build resilience, and let businesses and households drive the economy forward. In doing so, India continues to chart its own course – one that has proven resilient, effective, and distinctly its own.
(Disclaimer: Views are personal and carry no affiliation to any institution.)
