Boosting Indian Economy | Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC PDF Download

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Union Budget 2025-26: Key Highlights

• The Union Budget for 2025-26 focuses on making India a technologically advanced and inclusive economy.
• Key areas of focus include infrastructure development, job creation, rural upliftment, and industrial growth.
• The budget aims to boost the Indian economy through various provisions and initiatives.

How Union Budget 2025-26 Provisions Will Spur Indian Economy? 

Tax Reforms for Higher Consumption: Income tax exemption raised to ₹12 lakh, reducing the direct tax burden on middle-class households.

• Revised highest tax slab to ₹24 lakh, ensuring more disposable income for higher-income groups.
• Increased consumption will boost demand, supporting sectors like Fast-Moving Consumer Goods (FMCG), real estate, and retail.
• Higher private consumption will accelerate economic activity, contributing to higher GST and indirect tax revenue.

Capital Expenditure for Growth: ₹11.21 lakh crore allocated for infrastructure, with 3.1% of GDP committed to capital formation.

• Public investment in transport, energy, and urban projects will create strong multiplier effects.
• Capital expenditure generates employment, increasing labor demand in construction and allied industries.
• Improved logistics infrastructure will enhance efficiency, lowering production costs for industries.

Attracting Investment: The Deep Tech Fund of Funds will support next-generation startups, fostering innovation, technology development, and job creation.

• The FDI increase to 100% in the insurance sector will attract more foreign investments, strengthening financial stability and boosting domestic capital markets.
• The modified UDAN scheme will improve regional connectivity, promote tourism, enhance trade, and support economic development in remote and hilly areas, driving overall economic growth.
• The budget also proposes to involve the private sector through Public-Private Partnership (PPP) models for investments.

Boost to the Blue Economy: Government prioritizes marine fisheries and shipbuilding, enhancing coastal economic development.

• Maritime Development Fund with ₹25,000 crore corpus will strengthen port infrastructure and shipbuilding.
• Potential expansion of coastal tourism and aquaculture could create millions of jobs in related sectors.
• India can leverage the potential of the global Blue Economy which is estimated to be at $24 trillion.

Agriculture Modernization: PM Dhan-Dhaanya Krishi Yojana aims to cover 100 low agricultural productivity districts, benefiting 1.7 crore farmers by enhancing irrigation and post-harvest storage facilities.

• ₹5 lakh loan limit under the Kisan Credit Card ensures better financial support for farmers.
• Higher rural income will increase rural consumption, positively impacting small businesses and retail sectors.
• Six-year Pulses Mission will reduce import dependency, increasing domestic agricultural self-sufficiency.

Boosting Rural Economy: ₹5 lakh loan limit under the Kisan Credit Card ensures better financial support for farmers.

• Higher rural income will increase rural consumption (which comprises 60% of private consumption), positively impacting small businesses and retail sectors.
• Makhana Board in Bihar to be established to enhance production, processing, and value addition of Makhana, boosting rural employment and income.
• Comprehensive Program for Fruits and Vegetables to promote efficient supply chains and ensure better market prices for farmers, strengthening the rural economy.

Support for MSMEs and Manufacturing: National Manufacturing Mission to boost Make in India, increasing the share of manufacturing in GDP.

• ₹10,000 crore Fund of Funds for Startups will improve innovation, job creation, and industrial diversification.
• Rs 5 lakh credit facility for 10 lakh micro enterprises will enhance access to finance.
• Investment in industrial corridors will integrate MSMEs into global supply chains, improving export potential.

Urban Development Push: ₹1 lakh crore Urban Challenge Fund has been set up for 'Cities as Growth Hubs', 'Creative Redevelopment', and 'Water and Sanitation' to upgrade city infrastructure, ensuring sustainable urban expansion.

• Affordable housing and governance reforms will increase private sector participation in real estate.
• Transport and sanitation investments will improve urban productivity, supporting higher per capita output.

Export Promotion and Global Trade Integration: Export Promotion Mission to coordinate policies, improving India's global trade competitiveness.

• The budget eliminates seven more tariff rates, following the removal of seven rates in the 2023-24 budget.
• BharatTradeNet to streamline trade documentation, reducing procedural bottlenecks in export processing.

Investment in Human Capital: 50,000 Atal Tinkering Labs to enhance digital and innovation skills in school students.

• Expansion of medical education by 10,000 additional seats to improve India's healthcare workforce.
• AI-driven skilling initiatives align workforce capabilities with Industry 4.0 requirements.

What are the Challenges for the Indian Economy? 

Global Supply Chain & Regulatory Uncertainties:

• Disruptions in raw material supply, rising costs, and logistical bottlenecks are impacting manufacturing and exports, which in turn is slowing down economic growth.
• Regulatory complexities, bureaucratic delays, and infrastructure gaps are creating hurdles for investments, entrepreneurship, and industrial expansion.

Fiscal Deficit Management:

• With a fiscal deficit projected at 4.4% of GDP, strict expenditure rationalization is needed.
• The government's ₹14.82 lakh crore market borrowings could push up interest rates, potentially crowding out private investment.
• Despite high public capital spending, private sector investment remains sluggish due to higher borrowing costs and external uncertainties.

Employment and Skilling Issues:

• 170 million jobs were created between 2016-2023, but Industry 4.0 demands expertise in AI, automation, and robotics.
• Urban employment faces structural challenges, as the urban share of GDP has remained stagnant between 52-55% from 2000-2020.
• There is a mismatch between labor supply and market demand, requiring urgent skilling and training reforms.

Climate Change and Sustainability Gaps:

• Budgetary allocations for climate-resilient infrastructure are insufficient despite the growing risks of climate change.
• Projects for carbon capture and sustainable agriculture lack policy incentives, slowing green transition efforts.

MSME Competitiveness:

• MSMEs contribute 45% of exports but lack technology integration in global value chains.
• Government schemes focus on credit, but digital transformation and market linkages remain underdeveloped.
• Limited adoption of e-commerce and digital platforms restricts global expansion opportunities for MSMEs.

Way Forward 

High-Level Committee for Regulatory Reforms:

• It will make regulations in the non-financial sector simpler, cutting down on red tape and lowering compliance costs.
• Simplifying certifications, licenses, and permissions will improve the ease of doing business, attract more investments, and create a friendlier environment for businesses, ultimately driving economic growth.

Fiscal Prudence with Growth:

• Enhancing revenue mobilization through better GST compliance and direct tax reforms is crucial.
• Aggressively meeting disinvestment and asset monetization targets of ₹10 lakh crore in new investments (2025-30) is essential.
• Public-private partnerships in infrastructure can alleviate fiscal pressure and improve efficiency.

Encouraging Private Investment:

• The government should offer targeted credit guarantees to stimulate private capital formation.
• Investment incentives should be directed towards high-growth sectors such as electronics, renewables, and pharmaceuticals.
• Creating a favorable investment ecosystem can attract foreign investors from countries like South Korea and Japan in these sectors.

Employment and Skilling Reforms:

• Aligning education programs with industry needs will enhance employability in technology sectors.
• Urban employment initiatives should incorporate rental housing reforms and transport subsidies to facilitate labor mobility.
• Promoting jobs in AI, automation, and sustainable energy will prepare India's workforce for the future.

Sustainable Growth and Climate Finance:

• Expanding green finance through sovereign green bonds can support climate adaptation initiatives.
• Integrating carbon trading incentives and circular economy models into national policy is important.
• Strengthening collaboration at the state level is necessary for effective climate resilience strategies.

Strengthening MSMEs for Global Trade:

• Digital transformation initiatives should aim to connect MSMEs with e-commerce and export platforms.
• Investing in technology and logistics infrastructure will enhance MSME involvement in global supply chains.
• Improving trade facilitation measures, such as single-window clearance, will boost export efficiency.