Union Budget 2025 Impact: Key Sector Analysis

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, serves as a financial roadmap for India's economic growth and development. Hailed as the ‘People’s Budget’ by the Prime Minister, it focuses on strengthening key sectors while ensuring inclusive growth. This article analyses how the budget fosters economic progress and lays a strong foundation for Viksit Bharat.

Union Budget 2025 Highlights

Increased funding for rural, sanitation, and water management.
Expansion of the National Infrastructure Pipeline to include electric mobility and green energy.
Tax reliefs and grants for startups in AI and biotech, along with increased spending on cybersecurity and digital literacy.
Simplified tax slabs, bringing more individuals under the 10% bracket, with new deductions for green investments and business-friendly tax reforms.
Strengthening healthcare with a focus on preventive care, vocational training, and digital health.
Enhanced direct cash transfers to farmers and tax incentives for sustainable farming practices.
Significant investments in renewable energy infrastructure and carbon emission reductions in key industries.

Impact on Key Sectors

1. Industrial Development and MSMEs

The reclassification of MSMEs has raised investment and turnover limits, with medium enterprises now allowed up to INR 125 crore investment and INR 500 crore turnover. The National Manufacturing Mission promotes clean technologies, including solar cells and EV components.

The Credit Guarantee Scheme now covers up to INR 10 crore for micro and small enterprises and INR 20 crore for startups. Additionally, Udyam-registered micro-enterprises can access credit cards with an INR 5 lakh limit. The PM SVANidhi scheme has been enhanced, offering UPI-linked credit cards with an INR 30,000 limit. Customs duty rationalization benefits industries like battery recycling and textiles, while handicrafts exporters gain extended export timelines and duty-free inputs.

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2. Education and Skill Development

The budget introduces transformative initiatives for skilling and higher education. Key highlights include:

Establishment of five National Centres of Excellence for Skilling in collaboration with global experts, aligning with the ‘Make for India, Make for the World’ initiative.
Allocation of INR 500 crore for a Centre of Excellence in Artificial Intelligence for Education.
Creation of 10,000 new medical seats and expansion of infrastructure in five IITs to accommodate 6,500 more students. These initiatives aim to boost educational quality, foster research and innovation, and enhance access to higher learning.

3. Tourism

To bolster tourism, the government has introduced the following measures:

Development of 50 tourist destinations through state partnerships via a “challenge mode.”
Visa waivers for select foreign tourist groups.
Special initiatives focused on Buddhist Circuit Tourism to attract international visitors.
MUDRA loans for homestay businesses to boost local tourism entrepreneurship.

4. Urban Development and Real Estate

Urban development and real estate receive a major boost with:

The establishment of a National Urban Infrastructure Fund with an allocation of INR 20,000 crore for smart cities and urban infrastructure projects.
Affordable Housing Zones in metropolitan areas to address the needs of lower-income groups.
Strengthening of Real Estate Investment Trusts (REITs), allowing investors to pool funds for commercial real estate. These measures aim to improve urban living standards, encourage sustainable development, and stimulate economic growth.

5. Infrastructure

Infrastructure remains a key priority, with a record allocation of INR 11.21 lakh crore to drive long-term growth and connectivity. Key projects include:

Expansion of the UDAN scheme to 120 new destinations, targeting 4 crore commuters over the next decade.
Extension of the Jal Jeevan Mission until 2028, ensuring safe drinking water for all rural households.
Increased private sector participation in infrastructure development.

6. Healthcare

Healthcare investments see a 9.8% increase, bringing the total allocation to INR 99,859 crore. Major reforms include:

Custom duty exemptions to reduce costs of medical devices, pharmaceuticals, and diagnostic equipment.
Higher tax deduction limits for health insurance premiums under Section 80D.
Complete exemption from customs duty on life-saving drugs and medicines, making essential treatments more affordable and accessible.

7. Financial Services

The financial sector undergoes key amendments to enhance growth and efficiency:

Increase in Foreign Direct Investment (FDI) limits for insurance from 74% to 100%, provided the entire premium is invested in India.
Revamp of the Central KYC Registry to simplify the Know Your Customer (KYC) process.
Rationalization of taxation on Unit Linked Insurance Plans (ULIPs), treating non-exempt ULIPs as capital assets with capital gains taxation.

8. Consumer Markets

The budget drives consumer spending and retail sector growth through:

Personal tax reliefs to enhance disposable income, encouraging higher consumer spending.
No income tax for individuals earning up to INR 12 lakh, increasing disposable income by INR 30,000 to INR 1.1 lakh annually, under new tax regime scheme.
A new Income Tax Bill simplifying the tax structure.
An increase in the home loan interest exemption limit, making home ownership more affordable.

Conclusion

The Union Budget 2025 presents a strategic balance between economic expansion and fiscal discipline. With significant investments in infrastructure, healthcare, education, and financial services, it aims to foster sustainable development and social equity. Proactive initiatives for MSMEs, startups, and tourism further enhance growth opportunities across sectors. Additionally, tax reforms and direct benefits for individuals are expected to drive consumer spending and economic momentum.

Overall, this budget sets the stage for Viksit Bharat, steering India towards long-term prosperity and global competitiveness. While its impact will unfold over time, the comprehensive measures suggest a promising trajectory for businesses, individuals, and the economy.

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*Disclaimer:*This video is based on publicly available information/news report on Union Budget 2025-26 and is for informational purposes only. Please consult your advisor for financial/taxation matters, DBS Bank does not advise on any tax aspects.