The Union Budget 2025-26 aims to address key challenges in the Indian economy, including sluggish private investment, weak domestic demand, and slow wage growth. While tax cuts for the middle class are a major highlight, the cautious approach leaves doubts about its effectiveness in sparking robust economic growth.
The government has chosen to provide significant tax rebates, ensuring those earning up to ₹12 lakh face no tax liability. This move is expected to boost consumption, especially among the salaried middle class, who have been struggling with inflation and rising GST burdens. However, it remains unclear whether this alone will generate a strong economic growth cycle.
Despite continued efforts to incentivize private investment, corporate tax revenues as a share of gross tax collection are projected to decline slightly, signaling the need for alternative strategies. Capital expenditure remains a priority, but allocations for key sectors like road transport, telecom, and railways have either decreased or stagnated. On the positive side, MSMEs and startups receive a boost, and the clean energy sector sees increased support. However, reductions in MGNREGS funding raise concerns, given its role in enhancing rural incomes. The budget also focuses on social security for gig workers and employment-linked initiatives, but gaps remain in addressing long-term job creation challenges.
