The Union Budget 2025-26 : An Analysis | P. S. Jayaramu

February4, 2025

Finance Minister Ms. Nirmala Sitharaman presented the Union Budget for the year 2025-26 a few days ago. Not being an economist, my focus is largely on the political aspects which surrounded budget making.

At the very outset, I like to submit that the presentation of the budget should not have been on 1st February , but, on or after 3rd February, as it was not proper to do so when campaigning for the Delhi Assembly elections were very much on. Well, some might say that the date for presentation of the Union Budget has been fixed for 1st February and as such it had to be presented. But, not long ago, as we know, the budget used to be presented on the last day of February. The central point of my argument is that the BJP-led government hoped to take political and electoral advantage of some of the key features of the budget during the reminder of the campaign period. This was done by none other than Prime Minister Modi in his campaign speeches across Delhi, by invoking the raise in the income tax limit to 12 lakhs. Indeed, he alluded in his speeches to the tax concessions to the middle class by describing the budget as the middle class budget! Though technically the benefits of tax concessions would be for the year 2025-26, the optics that the government is concerned about the tax payers’ woos is enough to spur the Delhi voters to turn sympathetic to the BJP during voting for the assembly. Whether BJP’s calculations will work or not in its favour will be known only when the results are out. It is surprising that neither the Aam Aadmi Party nor the Congress raised the issue of the impropriety of presenting the Budget ( busy as they were in denigrating each other) when the election process was on. In any case, as the PM’s campaign speeches revealed the battle is between the AAP’s and BJP’s outreach to the middle classes, in view of the fact that the middle class voted the AAP to power in the last two assembly elections, with its leader Kejriwal being its hero. The Election Commission of India,meak it is, did not muster the courag to ask for a postponement of the presentation of the budget by a few days.

Let me turn my attention to the key aspects of the Union Budget. While presenting the budget, Ms. Sitharaman spoke of the five issues which form the key focus of the government , namely accelerating growth, securing inclusive development, invigorating private sector investments,uplifting household sentimenents and enhancing spending power of India’s rising middle class. Lofty goals, but as several reports show, inequality is on the rise in India. Inclusive growth is only a chimera.

As expected, the finance minister invoked in the very beginning itself, the leadership of PM Modi in ‘the journey to unlock our nation’s tremendous potential for greater prosperity and global positioning’. The customary reference to Viksit Bharat, by quoting from the Telugu poet Appa Rao that ‘a country is not just it’s soil, but its people’, was Nirmala Sitharaman’s way of keeping BJP’s major coalition partner Telugu Desam in good humour. We have to wait and see to what extent this budget is going to be really people-centric with it’s benefits trickling down to the common man. The numerous references made to Bihar are in keeping with BJP’s immediate and near-term priorities keeping in mind the assembly elections in that State slated towards the end of the year and how to win . The budget promises made to Bihar include the Western Kosi Canal Project, a greenfield’s airport and expansion of the Patna airport. The reference to the setting up of the Makhana Board is vital as Bihar contributes about 85 % of makhana production in the country. The promise of infrastructure development, along with the job opportunities that would come about are linked to attracting the young voters to it’s side The expansion of the IIT in Patna is also partly driven by the objective of winning over the aspirational youth voters. Needless to say, BJP has used the Union budget as a tool to promote itself in Bihar.

Farmers constitute a key segment of the government’s catchment area. With the Prime Minister Dhan Dhanya Krishi Yojana, the government has focused on 100 districts with low productivity, egging them to agree on crop diversification, post-harvest storage facilities and credit and irrigation schemes. Reportedly, 1.7 crore farmers would benefit from these programmes. While it is a welcome initiative, the actual allocation in the budget for agriculture is meagre. In the budget, agriculture and allied activities have received ?1.71 lakh crores, up from the 2024-25 budget figure of ?1.40 lakh crores and the revised estimates of 1?1.51 crores. So much so, many farmers unions and agricultural experts like Devendra Sharma have rightly criticised the allocations where nearly 50 % of tbe population depend on agriculture.

As regards health, the sector gets ?99,859 crores, up by 9.8 crores. The budget prioritises medical care and infrastructure. The decision to set up 200 cancer centres and exempt life-saving drugs totally from taxation are welcome steps. However, it remains to be seen how much of care would be bestowed on improving hospitals with suffiently trained doctors in rural rural, where health is a matter of deep concern.

Regarding education, happily the allocation for school education is high at ?78,572 crores, which seems to be the highest. Higher education receives a total allocation of ?50,077 crores. The emphasis is on creating infrastructure in new IITs started since 2014. The fear is that central universities may suffer comparatively, what with high percentage of faculty positions in all of them vacant. Will Indian universities be able to develop on par with their western and Asia-Pacific counterparts, especially with governmental control over faculty and VCs appointments, raises certain serious questions.

Defence sector has received a meagre hike in budget allocation. The total allocation is 6.81 lakh crores, up from the ? 6.22 lakh crores of tbe previous fiscal, an increase of about 6%.Since the allocation includes payment of salaries and pension payments, it remains to be seen how much would be available for purchase of sophisticated weaponry and equipments required by our defence forces, specially in view of the enhanced threat perception from China.

It is however the concessions in income tax which has attracted the widest attention in the budget , both by the government and the media. The FM’s announcement of no tax upto ?12 lakhs, along with new slabs, along with new slabs (by creating a new slab of 25% tax) which is projected as attractive to the middle class. However, the finance minister’s expectation that the savings by way of tax would lead to higher spending by the tax-payers is debatable. It is possible that a vast majority of the middle class tax payers may like to save, rather than spend, given the inflationary levels and job uncertainties in the private sector.

Finally, there are serious concerns which need to be raised about the higher level of fiscal deficit (4.8%), the unwillingness of the private sector to invest in national development despite getting tax benefits, the flight of capital from the country and the volatile international global position. Of particular concern will be the impact of higher taxes by Presidesh Donald Trump on Indian exports to the US and its impact on our fiscal position. Also to be watched out are how much of the allocations made in key sectors would be actually spent, what would be the revised estimates in course of time, up or lower from the BE figures. As of now, despite all the media hype and the government’s propaganda machine about the positives in Union Budget 2025-26, it can not be given three cherers. Also, keeping the ground realities in mind, the government and the fourth estate should talk more about ‘Prastut Bharat’ and less about the faraway dream of ‘Viksit Bharat’ of 2047.

(Author: Prof. P. S. Jayaramu is former Dean, Faculty of Arts, Bangalore University and former Senior Fellow, ICSSR, New Delhi)