Union Budget 2025-26 Highlights

The Union Budget for the fiscal year 2025-26 aims to accelerate growth, moving India closer to developed country status, with a focus on capital expenditure and tax reforms.

Economic Growth Projections

• The budget projects a nominal GDP growth of 10.1% for 2025-26.
• The Economic Survey 2024-25 anticipates a real GDP growth between 6.3%-6.8%.
• Capital expenditure for 2025-26 is set at ₹11.2 lakh crore, slightly above the 2024-25 estimate.
• The required rate of real growth to achieve developed country status is estimated at 8%.

Tax Revenue and Concessions

• Gross tax revenue growth has declined, with buoyancy falling from 1.4 in 2023-24 to 1.07 in 2025-26.
• Direct taxes have increased to 59% of the government's gross tax revenue by 2025-26.
• Personal income-tax growth fell from 25.4% in 2023-24 to 14.4% in 2025-26.
• Corporate income-tax growth is projected at 10.4% for 2025-26.

Non-tax Revenues

• Non-tax revenues are projected to rise from ₹5.3 lakh crore to ₹5.8 lakh crore in 2025-26.
• Main contributions stem from dividends by the Reserve Bank of India and public sector companies.

Government Expenditure

• The government aims to reduce expenditure as a percentage of GDP from 14.6% to 14.2%.
• Total expenditure growth is set at 7.6%, lower than the nominal GDP growth.
• The quality of expenditure has improved, with a higher share of capital expenditure.

Artificial Intelligence Investments

• India needs to enhance AI infrastructure to compete globally, following the U.S.'s $500 billion investment.
• Technology companies should be incentivized for R&D in AI.

Fiscal Policy Changes

• The budget moves away from fiscal deficit as a key indicator, focusing instead on the debt-GDP ratio.
• The lack of specific fiscal deficit targets makes fiscal policy less transparent.
• Clearer targets for fiscal discipline and debt-GDP ratios are suggested for better policy guidance.