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The Union Budget 2025-26 marks a critical juncture in India’s economic journey, balancing the twin objectives of economic growth and macroeconomic stability. In the face of global economic uncertainties, inflationary pressures, and fiscal constraints, the government has adopted a pragmatic approach that prioritizes fiscal discipline while promoting investment-led growth.
For UPSC aspirants, understanding the nuances of this budget is crucial for Prelims (Economy Section), Mains (GS Paper III – Indian Economy), and Essay Paper. This document provides a comprehensive analysis of the budget, covering key themes, fiscal strategies, sectoral allocations, and its implications on India’s long-term economic trajectory.
Fiscal Deficit and Debt Management
The fiscal deficit target for 2025-26 is 5.3% of GDP, aiming for a gradual reduction to 4.5% by 2027.
The government has reinforced the Debt-to-GDP ratio as a key fiscal anchor, targeting a sustainable debt level below 60% of GDP.
Increased focus on tax buoyancy and non-tax revenues through strategic disinvestments and rationalized subsidies.
Revenue and Expenditure Trends
Tax Revenue Growth: Higher collections expected from direct taxes (income tax and corporate tax) and GST reforms.
Expenditure Priorities:
Increased capital expenditure on infrastructure and manufacturing.
Rationalization of non-essential subsidies.
Enhanced allocations for social sector schemes like health and education.
Sectoral Allocations
Infrastructure & Capital Expenditure: ₹11 lakh crore allocated to highways, railways, and urban infrastructure.
Defense: ₹6 lakh crore, ensuring military modernization while maintaining fiscal prudence.
Health & Education: PM Arogya Yojana 2.0 and increased budget for National Education Policy (NEP) implementation.
Agriculture & Rural Development: More funds for PM-KISAN and rural employment programs like MGNREGA.
Infrastructure and Industrial Growth
Expansion of the National Infrastructure Pipeline (NIP).
Boost to Make in India and PLI (Production Linked Incentive) schemes for manufacturing growth.
FDI Reforms to attract foreign investment in critical sectors.
Digital Economy and Innovation
Strengthening of Digital Public Infrastructure (DPI).
Increased allocation for AI, 5G, and semiconductor manufacturing.
Promotion of startup ecosystems through tax exemptions and credit support.
Green Growth and Sustainability
National Green Hydrogen Mission to reduce carbon footprint.
Incentives for renewable energy and electric vehicles (EVs).
Increased funding for climate-resilient agriculture.
Monetary-Fiscal Coordination
RBI and the government working to keep inflation within the 4% target range.
Targeted interest rate policies to prevent excessive volatility.
Social Safety Nets and Inclusive Growth
Subsidy Rationalization: Focus on efficiency in food, fertilizer, and fuel subsidies.
Direct Benefit Transfers (DBT) expansion to reduce leakages.
Increased funds for employment generation and rural economy support.
Global Economic Headwinds
Slowdown in global trade and investment flows.
Impact of geopolitical tensions on oil prices and supply chains.
Domestic Risks
Revenue shortfalls if tax collections do not meet expectations.
Risks of rural distress due to climate change and agrarian issues.
State-level fiscal imbalances impacting overall growth.
Prelims Perspective
Fiscal Deficit Target, Debt-GDP Ratio.
Major Schemes and Allocations.
Economic Survey Key Highlights.
Mains Perspective
GS Paper III: Economic Growth vs. Fiscal Prudence.
GS Paper II: Governance & Public Finance.
Essay Topics: “Balancing Growth and Stability in India’s Economic Policy”
The Union Budget 2025-26 presents a balanced approach by prioritizing capital expenditure, fiscal prudence, and structural reforms. However, achieving the ambitious targets will require effective implementation and robust revenue mobilization. For UPSC aspirants, a thorough understanding of this budget will be instrumental in tackling economy-related questions across various papers.
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