Union Budget 2025: Sitharaman’s focus on four key economic engines

Union Finance Minister Nirmala Sitharaman presented the Union Budget for 2025-26 in Parliament, emphasizing accelerated growth, inclusive development, and private sector investments. The Budget aims to enhance the spending power of India’s middle class while positioning the country as a global economic leader.

Sitharaman underscored the government’s commitment to economic expansion despite geopolitical challenges. She reiterated Prime Minister Narendra Modi’s vision of Viksit Bharat, which includes poverty eradication, quality education, universal healthcare, full employment, and increased women’s participation in economic activities.

“Our economy is the fastest-growing among all major global economies. Our development track record of the past 10 years and structural reforms have drawn global attention,” she stated.

The Budget is structured around ten broad themes, focusing on agriculture, rural prosperity, inclusive growth, manufacturing, MSMEs, employment, innovation, energy security, exports, and nurturing innovation.

Sitharaman identified four key economic engines—agriculture, MSMEs, investment, and exports—supported by comprehensive reforms. The Budget also introduces transformative changes across six critical domains: taxation, power sector, urban development, mining, financial sector, and regulatory reforms.

“Agriculture as the first engine’

Sitharaman emphasized ‘Agriculture as the 1st Engine’ announced a series of measures aimed at boosting productivity, ensuring food security, and strengthening rural resilience.

Prime Minister Dhan-Dhaanya Krishi Yojana to develop agri districts

A new initiative, the Prime Minister Dhan-Dhaanya Krishi Yojana, will be launched in partnership with states to enhance agricultural productivity. Inspired by the Aspirational Districts Programme, this initiative will focus on 100 districts with low productivity, moderate crop intensity, and below-average credit access. Key objectives include:

• Boosting crop yields
• Promoting sustainable agriculture practices
• Expanding post-harvest storage at the panchayat and block levels
• Enhancing irrigation facilities
• Improving access to short-term and long-term credit

The initiative is expected to benefit 1.7 crore farmers nationwide.

Building Rural Prosperity and Resilience

The government will also introduce a Rural Prosperity and Resilience program to tackle underemployment in agriculture. By investing in skilling, technology, and rural infrastructure, the program aims to create economic opportunities in villages, ensuring that migration remains an option rather than a necessity. The initiative will particularly focus on women, young farmers, rural youth, small and marginal farmers, and landless families.

Mission for Aatmanirbharta in pulses

In an effort to achieve self-sufficiency in pulses, the government will roll out a six-year Mission for Aatmanirbharta in Pulses, focusing on Tur, Urad, and Masoor. The National Agricultural Cooperative Marketing Federation (NAFED) and the National Cooperative Consumers’ Federation (NCCF) will procure these pulses from registered farmers over the next four years to ensure stable pricing and supply.

Comprehensive program for fruits and vegetables

With rising incomes and growing awareness of nutrition, the demand for vegetables, fruits, and millet-based products (Shree-Anna) has increased. The government plans to launch a comprehensive programme, in collaboration with states, to support production, efficient supply chains, processing, and farmer remuneration. Farmer Producer Organizations (FPOs) and cooperatives will play a crucial role in its implementation.

National Mission on High Yielding Seeds

A new National Mission on High Yielding Seeds will be launched to:

• Strengthen the agricultural research ecosystem
• Develop high-yield, pest-resistant, and climate-resilient seeds
• Ensure commercial availability of over 100 seed varieties released since July 2024

Expansion of Fisheries Sector

India, the world’s second-largest producer of fish, aims to unlock the full potential of its marine sector. The government will introduce a policy framework to harness fisheries in the Indian Exclusive Economic Zone and High Seas, with a special focus on the Andaman & Nicobar and Lakshadweep Islands.

Mission for Cotton Productivity

A five-year Mission for Cotton Productivity will be launched to improve cotton farming practices and promote extra-long staple cotton varieties. The initiative aligns with India’s 5F Vision for the textile sector and aims to boost farmer incomes while ensuring a steady supply of high-quality cotton.

Enhanced Credit for Farmers

The loan limit under the Modified Interest Subvention Scheme for Kisan Credit Cards (KCC) will be raised from ₹3 lakh to ₹5 lakh. This move is expected to benefit 7.7 crore farmers, including fishermen and dairy farmers, by providing easier access to credit.

New Urea Plant in Assam

To enhance domestic urea production, a new plant with an annual capacity of 12.7 lakh metric tons will be established in Namrup, Assam. This initiative aligns with the government’s push for Atmanirbharta (self-reliance) in urea production.

India Post to Drive Rural Economy

India Post, with its extensive rural network of 1.5 lakh post offices and 2.4 lakh Dak Sevaks, will be repositioned as a key player in the rural economy. The government plans to transform it into a major public logistics organization, catering to artisans, MSMEs, self-help groups, and large businesses.

“MSMEs as the 2nd engine”

Sitharaman unveiled a series of measures aimed at strengthening the Micro, Small, and Medium Enterprises (MSMEs) sector, boosting investment, and expanding social security programs to foster economic growth and employment generation.

Revision in classification criteria for MSMEs

Currently, India has over 1 crore registered MSMEs, employing 7.5 crore people and contributing 36% to the country’s manufacturing sector. These enterprises are responsible for 45% of exports. To further enhance their growth, the government has announced an increase in investment and turnover limits for MSME classification, which will be raised by 2.5 times and 2 times, respectively.

Expanded credit access for MSMEs and Startups

To improve credit availability, the government has enhanced the credit guarantee cover:

• For Micro and Small Enterprises, the limit has been increased from ₹5 crore to ₹10 crore, facilitating an additional ₹1.5 lakh crore in credit over the next five years.
• For Startups, the limit has been doubled from ₹10 crore to ₹20 crore, with a moderated guarantee fee of 1% for loans in 27 key sectors aligned with the Atmanirbhar Bharat initiative.
• For well-performing MSME exporters, term loan guarantees have been raised to ₹20 crore.

Additionally, Credit Cards for Micro Enterprises with a ₹5 lakh limit will be introduced for those registered on the Udyam portal, with 10 lakh such cards set to be issued in the first year.

New Fund of Funds and First-Time Entrepreneur Support

The Alternate Investment Funds (AIFs) for Startups have already received commitments exceeding ₹91,000 crore, supported by the government’s existing ₹10,000 crore Fund of Funds. A new Fund of Funds with another ₹10,000 crore contribution has been announced to further this initiative.

For first-time entrepreneurs, a new scheme targeting 5 lakh women, Scheduled Castes, and Scheduled Tribes will be launched. It will provide term loans of up to ₹2 crore over the next five years, drawing from lessons of the successful Stand-Up India scheme. Online capacity-building programs for entrepreneurship and managerial skills will also be implemented.

Support for Labour-Intensive Sectors

The government has committed to specific policy and facilitation measures for labour-intensive sectors, including:

• Footwear & Leather Sector: A focus product scheme will be introduced to enhance design capabilities, component manufacturing, and production of non-leather quality footwear. This initiative is projected to create 22 lakh jobs and generate ₹4 lakh crore in turnover, with exports exceeding ₹1.1 lakh crore.
• Toy Industry: A new scheme will develop clusters, enhance skills, and establish a manufacturing ecosystem to position India as a global hub for toy production.
• Food Processing: A National Institute of Food Technology, Entrepreneurship, and Management will be set up in Bihar to boost food processing activities in the eastern region, improving farmer incomes and creating skilling and employment opportunities.

Manufacturing and Clean Tech Initiatives

The government will establish a National Manufacturing Mission to support industries of all sizes in furthering the ‘Make in India’ initiative. The mission will offer policy support, execution roadmaps, and governance frameworks.

Given the focus on climate-friendly development, a Clean Tech Manufacturing Initiative will be introduced to enhance domestic value addition in solar PV cells, EV batteries, motors, controllers, electrolyzers, wind turbines, high-voltage transmission equipment, and grid-scale batteries.

Investment in Human Capital and Infrastructure

Education and Skilling Initiatives

• Saksham Anganwadi and Poshan 2.0: Nutritional support will be expanded to over 8 crore children, 1 crore pregnant and lactating women, and 20 lakh adolescent girls in aspirational districts and the Northeast.
• Atal Tinkering Labs: 50,000 new labs will be established in government schools over five years to promote curiosity, innovation, and scientific thinking among students.
• Broadband Connectivity: Government secondary schools and primary health centers in rural areas will be connected through the BharatNet project.
• Bharatiya Bhasha Pustak Scheme: Digital Indian language books will be provided for school and higher education to improve subject comprehension.
• National Centres of Excellence for Skilling: Five new centers will be set up to equip youth with skills required for both domestic and international manufacturing sectors.
• IIT Infrastructure Expansion: Additional infrastructure in five IITs established after 2014 will be created to accommodate 6,500 more students, while hostel and campus capacity at IIT Patna will also be expanded.
• AI Centre of Excellence for Education: A ₹500 crore AI research center will be established to focus on educational applications of artificial intelligence.

Healthcare and Social Security

• Medical Education Expansion: The government plans to add 10,000 more UG and PG medical seats next year, with a goal of adding 75,000 seats over five years.
• Day Care Cancer Centres: 200 such centers will be established in district hospitals by 2025-26 to improve cancer treatment accessibility.
• Urban Livelihood Scheme: A new initiative will be launched to enhance income opportunities for urban workers.
• PM SVANidhi Expansion: The popular scheme benefiting 68 lakh street vendors will be revamped, featuring higher loans, UPI-linked credit cards with a ₹30,000 limit, and capacity-building support.
• Social Security for Gig Workers: Online platform workers will be provided identity cards and registered on the e-Shram portal, with healthcare coverage under PM Jan Arogya Yojana, benefiting nearly 1 crore gig workers.

 ‘Investing in the Economy’

Sitharaman announced a series of significant economic and infrastructure initiatives aimed at bolstering development through public-private partnerships (PPP), state support, and strategic investments across key sectors.

Public-Private Partnership (PPP) in Infrastructure:Each ministry will draft a three-year PPP project pipeline, with states eligible for financial support from the India Infrastructure Project Development Fund (IIPDF).

State Infrastructure Support: A ₹1.5 lakh crore, 50-year interest-free loan is allocated for state capital expenditure, with reform incentives.

Asset Monetization Plan 2025-30: The government will reinvest ₹10 lakh crore into new projects, building on the success of the 2021 plan.

Jal Jeevan Mission extended:The scheme, covering 80% of rural households, is extended to 2028 to ensure 100% coverage, with a focus on sustainability.

Urban Sector Reforms: A ₹1 lakh crore Urban Challenge Fund will promote city redevelopment and water management, with ₹10,000 crore allocated for 2025-26.

Power & Nuclear Energy: States implementing power reforms get 0.5% additional borrowing capacity. The government targets 100 GW nuclear capacity by 2047, with a ₹20,000 crore Nuclear Energy Mission supporting Small Modular Reactors (SMRs).

Maritime Development: A revamped Shipbuilding Financial Assistance Policy and a ₹25,000 crore Maritime Development Fund will boost the sector.

Regional Connectivity (UDAN Expansion): The scheme expands to 120 new destinations, targeting four crore passengers, with enhanced focus on remote regions.

Bihar’s Infrastructure Boost: New greenfield airports, Patna Airport expansion, and Western Koshi Canal funding will benefit the region.

Mining Sector Reforms: A State Mining Index and critical mineral recovery policy will enhance sustainability.

Housing & Affordable Homes: SWAMIH Fund 2 (₹15,000 crore) will complete one lakh stalled housing units by 2025.

Tourism Growth & Employment:Top 50 tourist destinations, including Buddhist sites, will receive investment. Medical tourism will be promoted under “Heal in India.”

Investment in innovations: The government has allocated ₹20,000 crore to implement a private sector-driven Research, Development, and Innovation initiative announced in the July Budget.

A Deep Tech Fund of Funds will be explored to support next-generation startups.

Under the PM Research Fellowship scheme, the government plans to provide 10,000 fellowships over the next five years for technological research at IITs and IISc with enhanced financial support.

To ensure future food and nutritional security, the government will set up the 2nd Gene Bank, which will house 10 lakh germplasm lines for conservation and genetic resource support.

A National Geospatial Mission will be launched to develop foundational geospatial infrastructure and data, modernizing land records, urban planning, and infrastructure design under PM Gati Shakti.

Lastly, the government will undertake the Gyan Bharatam Mission to survey, document, and conserve over 1 crore manuscripts, and establish a National Digital Repository for Indian knowledge systems.

‘Exports as the 4th engine’

For export promotion, Sitharaman announced setting up of an Export Promotion Mission, with sectoral and ministerial targets, driven jointly by the Ministries of Commerce, MSME, and Finance to facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets.

A digital public infrastructure, ‘BharatTradeNet’ (BTN) for international trade will be set-up as a unified platform for trade documentation and financing solutions. This will complement the Unified Logistics Interface Platform. The BTN will be aligned with international practices.

To integrate India into global supply chains, support will be provided for domestic manufacturing capacities, with participation from industry representatives. The government also aims to capitalize on Industry 4.0 by supporting the domestic electronic equipment industry.

A National Framework for GCC will guide states in promoting Global Capability Centres in tier-2 cities, while infrastructure and warehousing for air cargo will be upgraded to support high-value perishable goods.

In terms of financial and regulatory reforms, the FDI limit in the insurance sector will be increased from 74% to 100%, and India Post Payment Bank services will be expanded in rural areas. The government also plans to introduce Grameen Credit Score for rural areas and simplify the KYC process with a revamped system to be launched in 2025.

To streamline business operations, procedures for company mergers will be simplified, and Bilateral Investment Treaties will be revamped to encourage foreign investment. The government is committed to enhancing the Ease of Doing Business, with a new High-Level Committee for Regulatory Reforms and an Investment Friendliness Index of States to be launched in 2025.

MT