Expectations from Union Budget 2025-26: Building a future for growth, sustainability, and inclusion

The Union Budget 2025-26 is poised to address India's economic challenges amidst slow growth, rising welfare demands, and global uncertainties. Key expectations include conditional capex loans for states, tax reforms, focus on household income, and a commitment to fiscal consolidation. With reforms and sustainable investments, this budget could set the foundation for long-term progress.

What makes the Union Budget 2025-26 so crucial?

India stands at a pivotal moment as it gears up for the Union Budget 2025-26. After years of pandemic-driven disruptions and global economic instability, the nation faces critical challenges. Economic growth has slowed, the welfare burden has escalated, and global geopolitical uncertainties add another layer of complexity.

This year’s budget is particularly significant, as it marks the first full-year budget of the newly elected government. People expect bold decisions to not only stabilise the economy but also lay the groundwork for long-term growth. With real GDP growth forecasted at 5.8% for FY25, the pressure to innovate and invest responsibly is higher than ever.

Must read:Legacy of Hindenburg Research and the silence that speaks volumes

Adding to the tension is the weakening rupee and rising inflation. Household budgets are strained, and industries—especially those dependent on exports—are seeking relief. Global factors like rising crude oil prices and the Trump-led US administration’s policies only exacerbate the situation.

The question is: Can this budget address immediate concerns while setting the stage for a prosperous future?

Can conditional capex loans for states solve the ₹1 Trillion shortfall?

One of the most anticipated announcements revolves around conditional interest-free capex loans for states. With an alarming ₹1 trillion shortfall in FY25’s capital expenditure, such loans could act as a lifeline for infrastructure projects across the country. But there’s a twist: these loans will likely be tied to performance metrics.

How does it work?

The central government may link capex loans to a state’s performance in achieving infrastructure targets and balancing welfare expenditures. For instance, a state focused heavily on populist welfare schemes (like monthly stipends) might face tighter scrutiny before receiving funds. This ensures fiscal responsibility and prioritises investments with tangible, long-term benefits.

Why is this necessary?

Government spending in FY25 fell to a six-year low of 14.3% of GDP, and capital spending hit a 15-year low. If this trend continues, India’s economic momentum could stall. By tying loans to performance, the government ensures that every rupee spent delivers measurable results—whether it’s improved roads, modernised railways, or green energy projects.

Anticipated impact:

Boost in employment through infrastructure projects.
Improved connectivity, particularly in rural and semi-urban areas.
An uplift in industries reliant on better infrastructure, like logistics and manufacturing.

Such strategic spending could create a ripple effect, spurring private sector investments while building public assets that benefit generations to come.

How will tax reforms affect individuals and corporates?

Tax reform is always a hot topic, and this year is no different. Simplifying taxes and addressing loopholes are at the top of the agenda.

Simplifying the GST structure

Currently, the Goods and Services Tax (GST) structure is a maze, with multiple slabs confusing businesses and consumers alike. Moving toward fewer and predictable tax slabs could reduce compliance burdens and leave more disposable income in the hands of consumers. For instance, merging the 18% and 28% slabs into a single rate could simplify the system while ensuring steady revenue collection.

Double Taxation on Dividends

One of the most contentious issues is the double taxation on dividend income. Investors currently pay tax when companies distribute dividends and again on their personal income tax returns. Industry leaders are calling for either tax deductibility at the company level or a return to earlier practices, where dividends were tax-free in the hands of shareholders.

What about corporate taxes?

Although India’s corporate tax rate was slashed in 2019 to 25%, private sector investments have not kept pace. Critics argue that the issue isn’t the tax rate itself but the overall business environment. This year’s budget could introduce additional measures, such as targeted incentives for startups and MSMEs, to encourage investments and job creation.

Expected outcomes:

For individuals: Higher disposable incomes and simplified tax filing processes.
For businesses: Lower compliance costs and more funds for expansion.

In essence, these reforms could pave the way for a more equitable and transparent tax system, encouraging both consumption and investment.

Editor's pick: When words wound: A gentle goodbye that broke our hearts

Should household income be a priority over consumption?

In recent years, economic policy has leaned heavily on boosting consumption to drive growth. But experts now argue that household income, not consumption, should be the primary focus.

Why shift the focus?

The construction sector—India’s second-largest employer after agriculture—has been struggling with stagnant wages and slowing project pipelines. By directly supporting wage growth in this sector, the government can uplift millions of families while creating a sustainable economic multiplier effect.

Similarly, Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in India’s economy. These businesses contribute over 30% to the GDP and provide employment to approximately 120 million people. However, many MSMEs are grappling with rising costs, outdated technology, and limited access to credit.

Proposed measures for MSMEs:

Expanding credit guarantee schemes to reduce borrowing costs.
Offering tax incentives for technology adoption and upskilling workers.
Streamlining regulations to bring more businesses into the formal economy.

In 2024, the government launched a pilot scheme offering non-inflationary aid to small manufacturers in Maharashtra. Within a year, participating MSMEs reported a 25% rise in revenues and a significant improvement in worker retention. Scaling such programs nationwide could have a transformative impact.

What’s the Big picture?

By prioritising income over consumption, the government ensures that economic growth is inclusive and sustainable. This approach could also help reduce inequalities, as higher household incomes enable better access to education, healthcare, and other essentials.

Motilal Oswal Financial Services Ltd

"As the Union Budget 2025-26 approaches, the government is grappling with pressing economic challenges, including slower domestic growth, escalating welfare expenditures, and the imperative for sustained capital investment.

This first full-year Budget of the new administration unfolds against a backdrop of subdued economic momentum, a weakening rupee, and heightened global geopolitical uncertainties, particularly with the Trump-led US administration. Unsurprisingly, expectations for bold and strategic measures are running high.

Here are five critical expectations:

Conditional interest-free capex loans for states

Capex loans should be linked to states’ performance metrics, such as capex achievement against budget targets and the welfare-to-capex ratio. For instance, states with a higher focus on welfare schemes (e.g., monthly stipends) should be scrutinised before receiving interest-free loans. This ensures fiscal responsibility while addressing the ₹1 trillion capex shortfall anticipated in FY25.

Simplify taxes and reform dividend taxation

With indirect taxes accounting for ~60% of total tax receipts, simplifying GST slabs and reducing these burdens will enhance disposable incomes.Address the double taxation on dividend income by making it tax-deductible for companies or reverting to earlier practices. These measures could provide relief to investors and improve tax compliance.

Focus on household income over consumption

Household income must take precedence over boosting consumption. Supporting the construction sector, India’s second-largest employer, and providing non-inflationary aid to MSMEs would bolster incomes sustainably. MSMEs, which contribute over 30% to India’s GDP, require targeted assistance to remain competitive and integrated into the formal economy.

Commit to fiscal consolidation and capex growth

Despite slower revenue growth, the government should target a fiscal deficit of 4.5% of GDP in FY26 while increasing capex by 10-15%. FY25 spending is projected to hit a six-year low of 14.3% of GDP, making a capex boost critical for economic momentum.

Recognise limitations in stimulating corporate investments

Corporate capex grew at just 8% CAGR from FY20 to FY24 despite a steep tax cut in 2019. Private sector investment depends more on project viability than fiscal incentives.

Policymakers should focus on creating a favourable environment for sustainable investments, especially as government capex grows at 16% CAGR over the same period."

Will fiscal consolidation and capex growth lead to sustained recovery?

Amid slowing revenue growth, maintaining fiscal discipline without compromising on development goals is a tightrope walk.

Fiscal Deficit Goals

The government is targeting a fiscal deficit of 4.5% of GDP by FY26. While this signals a commitment to fiscal responsibility, achieving it will require meticulous planning, particularly in the face of subdued tax collections and rising welfare expenditures.

Capex Growth: The Silver Bullet?

Capital expenditure is the backbone of economic growth. Despite the fiscal constraints, the budget is expected to increase capex spending by 10-15% in FY26. This would translate into modern infrastructure, better public services, and a more attractive investment climate.

Key sectors likely to benefit:

Green Energy: Expanding India’s solar and wind energy capacities.
Public Transportation: Metro rail projects in Tier 2 and Tier 3 cities.
Healthcare: Modernising district hospitals to improve access.

Challenges ahead:

While government spending on capex grew at a 16% CAGR from FY20 to FY24, corporate investment grew by just 8%. This disparity highlights the importance of creating an ecosystem that encourages private players to step up.

Potential solutions:

Offering guarantees or co-investment opportunities to reduce private sector risks.

Fiscal consolidation paired with robust capex growth could be the recipe for a long-term recovery, but only if implemented with precision.

Also read: Union Budget:Real Estate industry expectations and recommendations

Are there limitations to stimulating corporate investment?

Despite the government’s efforts to stimulate private investments—most notably through the corporate tax cuts of 2019—corporate capex has grown at a modest 8% CAGR from FY20 to FY24. This raises an important question: are fiscal incentives alone enough to drive private sector investment?

The Corporate Capex Paradox
Several factors have contributed to the sluggish growth in corporate investment:

Project Viability: Private companies remain cautious, often prioritising high-return, low-risk ventures.
Demand Uncertainty: Weak global demand and a slowing domestic economy discourage large-scale investments.
Infrastructure Bottlenecks: Poor logistics and delayed approvals remain a hurdle.

In contrast, government capex has grown at a robust 16% CAGR during the same period, demonstrating the state’s willingness to pick up the slack. However, this raises concerns about the sustainability of public investment-driven growth.

What can Policymakers do Differently?

De-risking Investments: Offer credit guarantees or subsidies for projects in critical sectors like green energy and digital infrastructure.
Ease of Doing Business: Streamline processes for land acquisition and environmental clearances.
PPP Models: Expand public-private partnership initiatives to share risks and rewards.

Looking Forward

The government needs to recognise that fiscal incentives are only one piece of the puzzle. Building confidence among corporates and fostering a favourable investment climate will require a multi-pronged approach.

How will the budget support India’s vision for SEZs and exports?

The Special Economic Zones (SEZs) play a vital role in India’s trade and industrial strategy, yet they have faced significant challenges in recent years. Declining exports, underutilisation, and restrictive policies have hampered their potential.

Challenges facing SEZs

Export Decline: Industries like gems and jewellery, which are heavily reliant on exports, have been hit hard by global economic uncertainties.
Policy Restrictions: Current SEZ policies prevent seamless integration with the domestic market, limiting their efficiency.

Proposed Reforms for SEZs

Amending the SEZ Act: Industry experts, like Colin Shah of Kama Jewelry, have called for changes to allow reverse job-work and better integration with domestic supply chains.
Simplifying Customs Processes: Streamlining paperwork and reducing delays could significantly boost exports.
Tax Incentives for SEZ Businesses: Extending exemptions and rationalising tax structures would encourage more businesses to operate within SEZs.

Potential Impact:

Reforming SEZ policies would not only support India’s export targets but also create jobs and increase foreign exchange earnings. Moreover, encouraging domestic manufacturing in SEZs could reduce India’s reliance on imports, improving the trade deficit.

Can green infrastructure be the foundation for growth?

With India committed to achieving net-zero emissions by 2070, the Union Budget 2025-26 is expected to prioritise sustainable infrastructure development. But what does this mean in practical terms?

Green Certification Incentives

One proposed measure is to incentivise developers to pursue green certifications for buildings and projects. This not only reduces carbon footprints but also enhances the long-term value of assets. Simplifying certification processes and educating stakeholders—particularly in Tier 2 and Tier 3 cities—could accelerate adoption.

Focus Beyond Metro cities

India’s urbanisation is no longer confined to metros like Delhi and Mumbai. Smaller cities are becoming hubs of economic activity. Developing sustainable infrastructure in these regions could ensure balanced growth while addressing the unique challenges of urbanisation.

Technology as a catalyst

From smart grids to energy-efficient transport systems, technology will play a pivotal role in India’s green transition. Allocations for R&D and subsidies for adopting smart technologies could make a significant difference.

Economic and Environmental Payoff

Investing in green infrastructure isn’t just good for the planet; it’s good for the economy. Such projects create jobs, attract foreign investment, and improve the quality of life for citizens.

How can MSMEs benefit from logistics and infrastructure spending?

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing nearly 30% of GDP and 40% of exports. However, they face significant logistical challenges that inflate costs and reduce competitiveness.

India’s High Logistics costs

Logistics costs in India currently stand at 13-14% of GDP, compared to the global average of 8%. This disparity is a major barrier for MSMEs, which often operate on razor-thin margins.

Proposed Solutions:

Improved Connectivity: Upgrading road, rail, and port infrastructure can significantly reduce transportation time and costs.
Digital Integration: Encouraging MSMEs to adopt digital supply chain tools can improve efficiency and transparency.
E-commerce Enablement: Expanding logistics networks to Tier 2 and Tier 3 cities will help MSMEs access new markets.

What’s at stake?

With better logistics, MSMEs could become more competitive globally, contributing to India’s goal of becoming a USD 7 trillion economy by 2030.

What does the budget tell us about India’s fiscal health?

As we examine the fiscal numbers, it’s clear that the government is walking a tightrope.

Fiscal Deficit Trends

The fiscal deficit for FY25 is projected at 4.8% of GDP, slightly better than the budgeted 4.9%. However, this improvement comes at the cost of deferred capital spending, which fell short by ₹1 trillion.

Tax Collections

Indirect Taxes: Outperformed expectations, reaching 64.2% of budget estimates by November 2024.
Direct Taxes: Lagged behind, achieving only 54.9% of targets.

Expenditure Patterns

Revenue spending grew to 60.1% of budget estimates, driven by welfare schemes and subsidies. Meanwhile, capital expenditure hit a 15-year low, underlining the urgent need for fiscal consolidation.

What to Watch in FY26

Gross tax growth is forecasted at 10.6%, while capex is expected to grow by 10-15%. The question is: can these projections hold up against the backdrop of slow revenue growth and rising expenditures?

What can we learn from past budgets?

To understand what the Union Budget 2025-26 could bring, we must reflect on the trends, successes, and shortcomings of the past five budgets. Each of these budgets aimed to address specific challenges, yet the outcomes have often fallen short of expectations in some areas. Here's a critical analysis of the past five Union Budgets and what they reveal about the road ahead.

Union Budget 2020-21: Coping with the pandemic

The 2020-21 budget was delivered just before the pandemic upended economies globally. It was designed with an ambitious vision but had to adapt quickly to COVID-19 realities.

Key Features:

Focused on agriculture, irrigation, and rural development, with an allocation of ₹2.83 lakh crore.
“Vivad se Vishwas” scheme to resolve tax disputes.
Emphasis on infrastructure and a national logistics policy.

Strengths:

The Agriculture Infrastructure Fund was a step in the right direction to modernise farming.
Prompt COVID-19 relief measures, including the Atma Nirbhar Bharat Abhiyan, helped cushion economic shocks.

Criticism:

Pre-pandemic goals like doubling farmers' income by 2022 lacked clarity and measurable progress.
The budget's optimistic revenue projections failed in light of the lockdown-induced slowdown.

Union Budget 2021-22: The recovery blueprint

Presented amidst a shrinking economy, the 2021-22 budget sought to stimulate growth through significant public investments.

Key Features:

Capital expenditure allocation increased by 34.5% to ₹5.54 lakh crore.
Focus on the healthcare sector, with ₹64,180 crore allocated for the PM Atmanirbhar Swasth Bharat Yojana.
Introduction of a Bad Bank to address NPAs in the banking sector.

Strengths:

The healthcare push was much needed in the wake of COVID-19.
Allocations for capital expenditure showcased the government’s intent to drive growth.

Criticism:

MSMEs, which were hit hardest by the pandemic, received limited direct support.
The budget relied heavily on privatisation and disinvestment, but progress was slow (e.g., Air India’s sale happened much later).

Union Budget 2022-23: Infrastructure and digital push

The 2022-23 budget was themed around infrastructure development and digital adoption, with the aim of boosting long-term economic growth.

Key Features:

PM Gati Shakti Master Plan introduced for multi-modal connectivity.
Focus on digital currency, including plans to launch the Digital Rupee.
68% of defence procurement earmarked for domestic manufacturers.

Strengths:

Infrastructure projects under Gati Shakti had the potential to improve logistics and reduce costs.
The Digital Rupee initiative positioned India as a forward-thinking economy.

Criticism:

High fiscal deficit (6.4% of GDP) raised concerns about sustainability.
The implementation of infrastructure projects faced delays due to bureaucratic hurdles.

Union Budget 2023-24: Growth with moderation

With a focus on moderation and fiscal prudence, the 2023-24 budget sought to balance growth aspirations with deficit reduction.

Key Features:

Fiscal deficit target of 5.9%, signaling a gradual return to fiscal discipline.
₹10 lakh crore allocated to capex, the highest in India's history.
Focus on green growth, including an energy transition fund of ₹35,000 crore.

Strengths:

Record capex allocation demonstrated the government’s focus on infrastructure-led growth.
Support for renewable energy projects aligned with India’s net-zero goals.

Criticism:

Rural employment schemes like MGNREGA saw cuts, raising concerns about rural distress.
Inflation concerns were not adequately addressed, putting pressure on household budgets.

Union Budget 2024-25: The precursor to elections

The 2024-25 budget carried an unmistakable electoral undertone, with a heavy focus on populist measures.

Key Features:

Increased allocations for welfare schemes, particularly for agriculture and rural development.
Personal income tax relief, including new tax slabs under the revamped regime.
Continued emphasis on capital expenditure, though with more conservative growth targets.

Strengths:

Welfare spending resonated with rural voters, addressing immediate socio-economic concerns.
Capex growth supported critical infrastructure projects.

Criticism:

Excessive focus on populist measures raised questions about fiscal discipline.
Private investments remained tepid, reflecting structural challenges not addressed in the budget.

Lessons for the 2025-26 Budget

1. Align Ambition with Implementation:
Several initiatives from past budgets (e.g., disinvestment, Gati Shakti) have faced delays due to weak execution. The upcoming budget must focus on actionable plans with clear timelines and accountability.

2. Balance Welfare and Growth:
While welfare spending is essential, over-reliance on it can strain fiscal health. The government must prioritise investments that offer long-term returns, like education, healthcare, and infrastructure.

3. Encourage Private Sector Participation:
Public investments alone cannot sustain growth. The budget must create a conducive environment for private players by addressing bottlenecks in approvals, land acquisition, and financing.

4. Be Transparent About targets:
Budget projections often lean toward optimism, leading to credibility gaps when targets are missed. Transparent and realistic targets will foster confidence among investors and stakeholders.

5. Tackle Rising Inequality:
India’s recovery has been uneven, with the urban-rural divide growing wider. The budget must introduce measures that bridge this gap, ensuring inclusive growth across all sectors.

Will this budget meet expectations?

The Union Budget 2025-26 carries the weight of immense expectations. To strike a balance between fiscal prudence and growth, it must offer bold reforms that address immediate challenges while laying the foundation for long-term progress. From simplifying taxes to boosting capex, prioritising household incomes, and creating a sustainable ecosystem, this budget has the potential to redefine India's economic trajectory.

FAQs

Why is the Union Budget 2025-26 significant?
It is the first full-year budget of the newly elected government and must address critical challenges like slow growth, rising welfare demands, and global uncertainties.
What are conditional interest-free capex loans for states?
These loans are tied to state performance metrics, ensuring fiscal responsibility while boosting infrastructure development.
How will the budget address MSME challenges?
The budget is expected to provide credit support, simplify regulations, and enhance digital integration to help MSMEs stay competitive.
What are the key fiscal trends for FY26?
Fiscal deficit is projected at 4.5% of GDP, with 10-15% growth in capex and a focus on green energy and infrastructure.
What role does green infrastructure play in this budget?
Green infrastructure aligns with India’s net-zero goals, creating sustainable growth opportunities while addressing climate challenges.

How will the Budget Impact everyday life?

The Union Budget isn't just about big numbers and policies; it directly affects how ordinary people live their daily lives. From changes in tax slabs to infrastructure developments, every decision made in the budget has a ripple effect on households, businesses, and the overall economy.

Impact on Household Budgets

One of the most eagerly awaited announcements every year is about income tax reforms. In the past, changes like increasing the tax rebate limit or simplifying the tax structure under the new regime have provided relief to middle-class families. For 2025-26, individuals expect further reduction in tax rates or higher standard deductions, which could leave more money in their hands.

Indirect Benefits of Infrastructure Development

Investments in infrastructure—whether it’s better public transportation, modern healthcare facilities, or green urban projects—translate into tangible improvements in daily life. For instance, the rollout of metro services in Tier 2 cities or the upgrade of railway systems would save hours of commute time for workers. Similarly, improved roads could reduce logistics costs, making goods cheaper for consumers.

Saving and investment Opportunities

Reforms in dividend taxation or better incentives for long-term savings (like tax-free bonds) could encourage individuals to invest more, creating wealth-building opportunities. Furthermore, proposed measures to boost sectors like real estate or renewable energy could open up new avenues for household investments.

The 2025-26 budget, while addressing macroeconomic goals, must not lose sight of the microeconomic changes that improve the quality of life for every Indian.

How does the budget Address Social Welfare and Inclusion?

A crucial aspect of the Union Budget is its focus on social welfare, particularly in areas like education, healthcare, and rural development. With rising inequality and the need to support vulnerable populations, these policies play a pivotal role.

Unemployment and Skill Development
Unemployment remains one of India’s most pressing challenges. The budget is expected to expand funding for skill development initiatives like the Skill India Mission, which can prepare young workers for jobs in emerging industries like AI, renewable energy, and e-commerce.

Healthcare Access and Spending
Post-pandemic, healthcare allocations have received a significant boost, but gaps remain, especially in rural areas. Proposals for 2025-26 may include:

Expansion of telemedicine services.
Modernising district hospitals.
Increasing insurance coverage under schemes like Ayushman Bharat.

Balancing Welfare and Growth
While welfare spending is crucial, the government must ensure that populist measures like subsidies don’t overshadow long-term development goals. Programs that empower individuals—such as education scholarships or job guarantee schemes—are more sustainable than short-term cash transfers.

How does the Budget promote Green and Sustainable Growth?

India's ambition to achieve net-zero carbon emissions by 2070 requires significant investments in green infrastructure. The Union Budget 2025-26 is expected to accelerate this transition.

Renewable Energy Push
Allocations for solar, wind, and hydropower projects could see a boost. For instance, incentives like production-linked incentive (PLI) schemes for renewable energy companies would make green energy more affordable and accessible.

Electrification of Transport
Electric vehicles (EVs) are a key part of India’s green future. Budget proposals may include:

Tax exemptions for EV manufacturers.
Subsidies for buyers of EVs.
Infrastructure upgrades like charging stations.

Green Bonds and Incentives for Sustainable Projects

To fund sustainable infrastructure, the government could issue more green bonds or offer tax benefits to developers of certified green projects. These measures would align economic growth with environmental conservation.

What Do Industry leaders expect from the budget?

Voices from the industry provide valuable insights into what various sectors need to thrive. Here’s what some prominent leaders expect from the Union Budget 2025-26.

Colin Shah, MD, Kama Jewelry

Shah emphasises the need to reform SEZ policies to make them more competitive. “Amending the SEZ Act and simplifying customs processes could revitalise exports and create more jobs in the gems and jewelry sector,” he says.

"The gems and jewelry industry is one of the key contributors to the economy and a huge employment creator in the country. However, over the past two years, the industry has been facing numerous challenges and needs urgent government intervention. A push must be made to encourage Jewellery manufacturing in India.

The Finance Minister must consider amending the current SEZ Act in order to integrate SEZs into the domestic market appropriately. The upcoming budget should also look at allowing ‘reverse job-work’, allowing SEZs to utilise their capacities more effectively .

Hence, when exports are consistently declining, this can prove to be a timely remedy to address the issue. The budget should also consider extending tax exemptions and simplifying the tax structure for SEZ businesses. It should also consider streamlining customs processes for SEZ units, which will make it easier for them to export their goods. The budget should also consider establishing a framework and accordingly adjusting policies to monitor the performance of SEZs."

Mahesh Ramanujam, CEO, Global Network for Zero

Ramanujam highlights the importance of sustainable infrastructure. “India’s focus on green certifications and Tier 2 city development will ensure balanced growth while addressing environmental challenges,” he observes.

"With the upcoming Union Budget marking the end of a quarter-century of growth and laying the foundation for India’s next phase of development, infrastructure must be a central focus. As one of the world’s fastest urbanizing nations, India faces the urgent challenge of building infrastructure that can effectively accommodate this population shift. However, this development cannot be limited to concrete structures, but it must include a sustainable foundation that enables the adoption of greener public and private infrastructure.

Last year’s allocation of INR 11.11 trillion for infrastructure must now evolve to push sustainability a step further and include more initiatives that prioritise the net zero vision, and one such step in the direction should be to incentivize green certifications for building project owners. Simplifying the certification processes and educating all segments of developers across the small to large paradigm about the long-term benefits of sustainable infrastructure will accelerate adoption across the sector. Furthermore this growth must extend beyond metropolitan areas, and should be complemented across all tiers including the Tier 2 and Tier 3 cities, creating opportunities for balanced and environmentally conscious development. Finally, technology should remain core to all our priority areas of growth, the budget must incorporate allocations for widespread adoption of new age smart and green technologies which could further support India’s 2070 net zero vision and its transition toward its long-term vision of becoming Viksit Bharat."

Mohan Ramaswamy, CEO, Rubix Data Sciences

Ramaswamy stresses the need to reduce logistics costs, which currently account for 13-14% of GDP. “Improved connectivity and modernised infrastructure can make India globally competitive,” he argues.

"India's ambition of achieving a USD 7 trillion economy by 2030 is intrinsically linked to strategic, long-term infrastructure development. The Union Budget 2025's emphasis on this sector is therefore crucial. Currently, as we have discussed at length in the Rubix Industry Insights—Logistics report, India's logistics costs are estimated at 13%–14% of GDP, significantly higher than the global average of around 8%. Efficient logistics, improved connectivity (including digital infrastructure), and modernised infrastructure can significantly reduce these costs, creating a more competitive business environment. This is especially important if we want to break into the Top 25 of the World Bank’s Global Logistics Performance Index. For MSMEs, which contribute approximately 30% to India's GDP and account for roughly 40% of exports, this translates to reduced operational costs, improved supply chain efficiency, and access to wider markets, both domestic and international. For example, improved road and rail networks can reduce transportation time and costs for MSMEs involved in manufacturing and agriculture, while enhanced digital connectivity can facilitate their participation in e-commerce and global value chains"

These insights underscore the budget’s potential to address sector-specific challenges while contributing to India’s broader economic goals.

Is India ready for a $7 Trillion economy by 2030?

India’s aspiration to become a $7 trillion economy by the end of the decade hinges on strategic investments and policy reforms. But are we on track to meet this goal?

The Role of Infrastructure

Modern infrastructure is critical for achieving high economic growth. The budget must prioritise investments in:

Smart cities with sustainable housing and public transport.
Digital infrastructure to expand internet penetration in rural areas.
Logistics reforms to reduce costs for industries and MSMEs.

Global competitiveness

To compete globally, India must improve its Global Logistics Performance Index (LPI) ranking. Efficient infrastructure, reduced red tape, and streamlined trade processes could make Indian businesses more competitive in international markets.

The Human Capital Factor
India’s demographic dividend—its young workforce—is a double-edged sword. Without proper education, skills, and job opportunities, this advantage could turn into a liability. The budget must address these gaps to unlock India’s true potential.

What can we expect for MSMEs in Budget 2025-26?

Micro, Small, and Medium Enterprises (MSMEs) are key to driving growth and job creation, but they face significant challenges.

Access to Finance
Budget 2025-26 could expand credit guarantee schemes to provide MSMEs with affordable loans. Simplifying access to formal credit would reduce their dependence on high-interest informal lenders.

Digitisation Incentives
Many MSMEs are yet to embrace digital tools for operations and marketing. Government subsidies for digitisation could make these businesses more competitive and open up new markets for them.

Logistics and Infrastructure Support
Improved transportation networks, particularly in rural and semi-urban areas, would help MSMEs reduce costs and access wider markets.

A stronger MSME sector isn’t just good for the economy—it’s a step toward more inclusive growth.

Will this Budget meet expectations?

The Union Budget 2025-26 represents an opportunity to steer India toward a prosperous and sustainable future. By addressing pressing challenges like fiscal deficits, slow private investments, and global uncertainties, the government can lay the foundation for long-term growth.

But as history shows, ambitious plans are only as good as their implementation. Will the government deliver on its promises, or will it fall short once again? Only time will tell

FAQs

What are the key expectations from Budget 2025-26?
The focus is on tax reforms, capex growth, MSME support, sustainable infrastructure, and household income growth.
How does the budget address climate change?
By promoting renewable energy, electric vehicles, and green certifications for infrastructure projects.
Why is the fiscal deficit a concern?
A high fiscal deficit limits the government’s ability to invest in growth sectors while maintaining fiscal discipline.
What measures are expected for MSMEs?
Expanded credit access, digitisation incentives, and improved logistics are anticipated to help MSMEs.
How will the budget impact middle-class families?
Likely tax reforms and infrastructure investments could increase disposable income and improve quality of life.

Tushar Mangl is an energy healer, vastu expert, and author of Ardika. He writes on topics like food, books, personal finance, and mental health while advocating for a greener, balanced world.

Tushar Mangl