Union Budget 2025-26 highlights four engines of Development

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 on Saturday (1st February). Union Budget 2025-26 highlights four engines of development for the 2025-26 fiscal year: agriculture, micro, small, and medium enterprises (MSMEs), investments, and exports.

“The fuel for this journey is provided by reforms, the guiding principle is inclusivity, and the destination is Viksit Bharat,” stated the finance minister.

What is the Union Budget?

1. The Union Budget (called the Annual Financial Statement under Article 112 of the Constitution of India) provides an account of the government’s financial health.

2. It shows details about a government’s finances by providing the estimated receipts and expenditures of the Government of India for the current financial year, along with revised estimates for the last financial year and actuals for the last-to-last financial year.

Union Budget 2025-26 highlights four engines

What does the Union Budget say on agriculture?

Agriculture, which supports more than 60 per cent of India’s population, is a major part of the country’s rural economy. Finance Minister Nirmala Sitharaman said that agriculture was one of the four engines driving India’s development journey and announced several new initiatives for the sector.

Some of the key initiatives are:

1. Prime Minister Dhan-Dhaanya Krishi Yojana (PMDDKY): PMDDKY will be implemented in collaboration with states, across 100 districts in its first phase. 

   • The scheme aims to increase agricultural productivity, adopt crop diversification and sustainable agriculture practices, improve post-harvest storage after harvest at the panchayat and block levels, improve irrigation facilities, and provide short-term and long-term credit.

2. National Mission on High Yielding Seeds: A National Mission on High Yielding Seeds will be launched, aimed at:-

   1. strengthening the research ecosystem,

   2. targeted development and propagation of seeds with high yield, pest resistance and climate resilience, and

   3. commercial availability of more than 100 seed varieties released since July 2024.

      

3. Pulse Mission: The government has announced an allocation of Rs 1,000 crore for a six-year initiative called the “Pulse Mission,” aimed at boosting pulse production to achieve self-sufficiency. This initiative will focus on three types of pulses: tur (arhar), urad (mash), and masoor.

4. Makhana board for Bihar: A Makhana Board will be set up in Bihar to boost the cultivation and marketing of fox nuts. The people engaged in Makhana cultivation will be organised in FPOs.

   • Bihar accounts for approximately 90% of India’s makhana production.

5. Rural Prosperity and Resilience’ program: A holistic, multi-sectoral ‘Rural Prosperity and Resilience’ program will be launched in collaboration with states.

   • This initiative aims to tackle under-employment in agriculture by promoting skill development, investment, technology adoption, and revitalization of the rural economy.

6. New urea plant to come up in Assam: Setting up of a new urea plant with an annual production capacity of 12.7 lakh tonnes (lt) at Namrup in Assam.

7. Grameen Credit Score (GCS): GCS, a framework to be developed by the public sector banks for the credit needs of the members of Self Help Groups (SHGs) and people in rural areas.

8. Mission for Cotton Productivity: For the benefit of cotton growing farmers a 5-year ‘Mission for Cotton Productivity’ is announced.

9. Enhancing loan limits for farmers: The finance minister also announced increasing the loan limit under the Modified Interest Subvention Scheme (MISS) from Rs 3 lakh to Rs 5 lakh.

What are the major announcements for India’s MSME sector in the Union Budget?

Giving new definitions for micro, small and medium enterprises (MSMEs) and announcing a slew of initiatives to help such businesses, Finance Minister termed them the second power engine for development.

It encompasses manufacturing and services with a focus on MSMEs numbering 5.7 crore. Several key initiatives announced to address the challenges faced by the manufacturing sector, particularly for MSMEs are:

1. Definition of MSMEs widened:  Finance Minister said the investment and turnover limits for classification of all MSMEs will be increased 2.5 and two times respectively.This means the investment limit to be classified as a micro enterprise goes up to Rs 2.5 crore. For small enterprises, this limit goes up to Rs 25 crore, and for medium ones, it becomes Rs 125 crore. Similarly, the turnover limit for these classifications goes up to Rs 10 crore for micro enterprises, Rs 100 crore for small ones, and Rs 500 crore for medium enterprises.

   

2. Credit Guarantee Limit Increased: The finance minister also announced the enhancement of the credit guarantee cover from Rs 5 crore to Rs 10 crore for micro and small enterprises, and from Rs 10 crore to Rs 20 crore for startups.

   • As part of the initiatives for MSMEs, she announced that a National Institute of Food Technology, Entrepreneurship and Management will be established in Bihar.

3. Customised credit cards (CCC): Customised credit cards with a limit of Rs 5 lakh were announced in the Budget for micro enterprises registered on the Udyam portal. In the first year, 10 lakh of these cards will be issued.

High-level committee for regulatory reforms

1. Union Finance Minister also emphasised the need for a light touch regulatory framework based on principles and trust, which could unleash productivity and employment.

2. The government plans to set up a high-level committee for regulatory reforms, which will review all non-financial sector regulations.

3. Notably, the Economic Survey 2024-25 has said that deregulation is more critical for MSME growth than large enterprises.

4. National Manufacturing Mission (NMM): The Central government will set up a National Manufacturing Mission for small, medium and large industries with a focus on clean tech manufacturing.

   • The mission’s mandate will include five focus areas – ease and cost of doing business, upskilling for in-demand jobs, MSMEs, availability of technology, and quality products.

5. Scheme for First-time Entrepreneurs: A new scheme will be launched for 5 lakh women, Scheduled Castes (SCs) and Scheduled Tribes (STs) first-time entrepreneurs. This will provide term loans up to Rs 2 crore during the next 5 years.

How does the Union Budget address investment-related challenges to stimulate economic growth?

Union Budget 2025 identifies investment as the third engine of India’s growth. It focuses on investing in people, the economy, and innovation. The following initiatives have been announced in the budget:

1. Urban Challenge Fund: The Government will establish a ₹1 lakh crore Urban Challenge Fund to support initiatives like ‘Cities as Growth Hubs,’ ‘Creative Redevelopment,’ and ‘Water & Sanitation’.

   • The fund will cover up to 25% of viable project costs, requiring at least 50% funding from bonds, bank loans, or PPPs. ₹10,000 crore is allocated for 2025-26.

2. Public Private Partnership (PPP) in Infrastructure: Each infrastructure-related ministry will come up with a 3-year pipeline of projects that can be implemented in PPP mode.

   • States will also be encouraged to do so and can seek support from the IIPDF (India Infrastructure Project Development Fund) scheme to prepare PPP proposals.

   

3. FDI in Insurance Hiked: Union Finance Minister announced a significant hike in foreign direct investment (FDI) in the insurance sector — from 74% to 100% — paving the way for the entry of global insurance giants, substantial foreign investments and tough competition in the Indian market.

   • Foreign investments will also provide much-needed capital to the Indian insurance sector, enabling insurers to offer better products and services.

4. SWAMIH Fund 2: It will be established as a blended finance facility with contribution from the Government, banks and private investors.

   • The existing Special Window for Affordable, Mid-Income Housing (SWAMIH) scheme aims to help middle-class families who pay EMIs on loans taken for apartments, and rent on their current dwellings.

Do you Know?

Investment Friendliness Index of States will launched this year for competitive cooperative federalism.

5. Nuclear Energy Mission for Viksit Bharat: A Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of Rs. 20,000 crore will be set up.

   1. At least 5 indigenously developed SMRs will be operationalized by 2033.

6. Deep Tech Fund of Funds: Investing in innovation the budget announced a ‘Deep Tech Fund of Funds’ for next generation startups and ten thousand PM research fellowships for technological research in IITs and IISc in next 5 years.

7. Maritime Development Fund: This fund will be set up with a corpus of Rs 25,000 cr. It will support the long-term financing of the maritime industry. Aims at distributing support and promoting competition. Upto 49% GoI support, rest by ports, private sector.

8. Historic Tax Cut: The finance minister has raised the limit of income tax rebate from Rs 7 lakh to Rs 12 lakh, which essentially means that if an individual has an income of up to Rs 12 lakh, she will have zero tax liability.

How does the Union Budget align with India’s goal of becoming a global export hub?

Finance Minister Nirmala Sitharaman identified exports as a key engine for development over the coming year. To this end, she announced five initiatives:

1. Export Promotion Mission: This mission will be driven jointly by the Ministries of Commerce, MSME, and Finance. It aims to facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets.

2. BharatTradeNet (BTN): A digital public infrastructure, ‘BharatTradeNet’ (BTN) for international trade will be set up as a unified platform for trade documentation and financing solutions.

   • The BTN will complement the existing Unified Logistics Interface Platform, which allows industry players to access logistics-related datasets from various government systems.

3. Global Supply Chain Integration: Support domestic manufacturing to integrate India’s economy into global supply chains, focusing on Industry 4.0 and youth talent.

4. National Framework for Global Capability Centres: As guidance to states for promoting Global Capability Centres (GCCs) in emerging tier 2 cities. GCCs offer support to MNCs.

   • The proposed policy aims at enhancing availability of talent and infrastructure, building-byelaw reforms, and mechanisms for industry collaboration.

5. Warehousing facility for air cargo: To facilitate the upgradation of infrastructure and warehousing for air cargo including high-value perishable horticulture produce.