On February 1, 2025, Nirmala Sitharaman, the finance minister of India, presented the Union budget for the year 2025-26.
The budget is expected to provide insights into the strategy of the government for the economic development, infrastructure, and welfare programs.
Key Highlights of the Union Budget 2025
Income Tax Relief
- The government has elevated the tax-free income threshold to Rs. 12 lakh, which will also enable spending by the middle class.
- Further, the personal income tax rate has also been cut, which will also intend to increase the consumption savings.
Fiscal deficit target
- The government forecasts a figure of 4.4% of the GDP for the fiscal deficit in its union budget 2025.
- This reflects the commitment of the government to fiscal discipline.
- Bond borrowing of Rs. 14.82 lakh crore is also planned to fund this deficit.
Support for the key sectors
- The union budget contains specifically enhanced support for the farmers, youths, women, and disadvantaged groups.
- New measures to strengthen agriculture, manufacturing, and financial services have also been introduced.
- Raising the limit for Foreign Direct Investment (FDI) in the insurance industry to 100% is also one step.
Encouraging local manufacturing
- To support the local assembly, import taxes on essential parts for the mobile phone have been removed by the government.
- This policy is anticipated to aid businesses such as Apple and Xiaomi, thereby boosting the electronics sector of India.
Critical minerals policy
- The union budget heralds the removal of customs duties on waste and scrap of the critical minerals, covering antimony, cobalt, tungsten, and lithium-ion batteries.
- This initiative is designed to assure the availability of these materials for manufacture in India.
Notable budget cuts in several sectors
The union budget has led to several cuts in several sectors of the economy.
Education
- In the education sector, the allocation of Rs. 125,638 crore accounts for roughly 4.5% of the total budget.
- This is a slight reduction from the previous year, which also raises questions about the impact on infrastructure and quality improvement initiatives in this sector.
Transportation
- Although the sources will not highlight any particular figure for the transportation sector, the capital expenditure (capex) for the year 2025-26 is estimated to be at Rs. 11.2 lakh crore.
- This number will illustrate a qualitative increase in the allocation from the previous year, which will also lead to concerns over the level of funding that is available for the infrastructure works, including transportation.
Rural development
- The amount of Rs. 265,808 crore, about 9.5% of the total budget, was allocated to the rural development.
- This allocation will resonate with the agenda of the government for revitalizing the rural economies.
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IT and telecom
- The IT and telecom sector received Rs. 116,342 crore which is also about 4.2% of the total budget.
- This allocation will indicate that the government will drive towards digital transformation.
- These budgetary decisions have brought in the disclosures of what may happen to the quality and accessibility of the services in the mentioned areas.
- Stakeholders are appealing against the imbalance which will also hinder further progress and aid towards education, transportation, rural development, and the IT and telecom industries.
Impact on the market
- The stock exchange registered a significantly positive reaction to the Union budget 2025, with the essential tax provisions and additional scope for the foreign investments which will also result in the increase in the indices.
- The absence of the import levies on the mobile parts will help the technology stocks, while more value will be added to the other spheres such as infrastructure and manufacturing.
- At the same time, investors will remain skeptical concerning the fiscal deficit target and the weakness of the world economy.
Conclusion
The investment objectives of the union budget 2025-26 of the government of India will focus on fostering economic growth, creating jobs, encouraging specific industries, and sustaining.
Frequently Asked Questions (FAQs)
Q1) What is the impact of union budget 2025?
Increased funding for rural, sanitation, and water management.
Q2) What is the impact of budget 2025 on the share market?
Mixed sentiments in the stock market.
Q3) Which sector will benefit from the budget 2025?
FMCG sector will benefit from the budget 2025.
Q4) How do budgets impact our lives?
It will help us to save money.
Q5) What is the economic impact of budget 2025?
The fiscal deficit is estimated to be 4.4% of the GDP.
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