The Union Budget 2025-26, while offering a generous tax exemption for those earning up to Rs 12 lakh per annum, falls woefully short of addressing the pressing need to steer the Indian economy out of its current slowdown. At a time when both global and domestic factors are exerting downward pressure on growth, the budget lacks a coherent vision or a robust action plan to counter these challenges.
The tax relief, though welcome for the middle class, appears more like a populist measure rather than part of a broader economic strategy. It offers immediate gratification without tackling the structural issues plaguing the economy. The absence of bold reforms or transformative policies to stimulate growth is glaring. There’s little in the budget that signals a decisive shift towards revitalizing key sectors or boosting investor confidence.
Adding to the disappointment is the lack of adequate focus on capital expenditure (capex). Capex has been a critical driver of economic growth, especially in the post-pandemic recovery phase. However, the budget’s allocation of Rs 11.2 lakh crore (or 3.1% of GDP) for capital expenditure, even when factoring in grants to states and CPSE capex, seems conservative and insufficient given the scale of the slowdown. In times of economic distress, aggressive public spending on infrastructure and development projects can act as a powerful stimulus, creating jobs, boosting demand, and crowding in private investment. Unfortunately, this budget misses that opportunity.
The government’s fiscal consolidation targets, while commendable in principle, appear to have come at the cost of growth-oriented spending. The fiscal deficit has been pegged at 4.4% of GDP for FY26, a reduction that seems more focused on meeting numerical targets than on fostering economic resilience.
Compounding these issues is an increasingly unfavorable global environment. The ongoing conflicts in Ukraine and the Middle East have disrupted global supply chains, spiked energy prices, and created geopolitical uncertainty, which is dampening investor sentiment worldwide. Additionally, the United States’ recent threats to impose higher tariffs on imports from emerging markets, including India, could further strain export growth and worsen the trade deficit.
Meanwhile, China is rapidly consolidating its position as an economic powerhouse. Despite its internal challenges, China’s aggressive investments in technology, infrastructure, and global trade partnerships have left India trailing in the race for economic dominance. The lack of ambitious reforms and investment strategies in India’s budget only widens this gap, raising concerns about the country’s ability to compete effectively on the global stage.
While schemes like the ‘Prime Minister Dhan-Dhaanya Krishi Yojana’ and the ‘Rural Prosperity and Resilience’ programme aim to support the rural economy, they lack the scale and ambition needed to create a substantial impact. Similarly, measures to support MSMEs and startups, though beneficial, do not compensate for the absence of a grander economic revival plan.
In conclusion, the Union Budget 2025-26 reflects a cautious approach when the economy demands boldness. The government’s reluctance to ramp up capital expenditure, its failure to present a clear roadmap for economic revival, and its lack of responsiveness to global economic shifts are significant missteps. This budget may provide short-term relief to taxpayers, but it does little to inspire confidence in India’s economic future.