Budget 2025: Unlocking opportunities for the private sector
The budget is not just a financial document; it’s a blueprint for the nation’s future economic roadmap, having far-reaching implications for various macroeconomic variables, such as national income measured in terms of Gross Domestic Product (GDP), public debt, inflation, employment, etc. Broadly, it is an annual financial statement comprising government receipts and expenditures. Besides, the budget is a vital tool in implementing the fiscal policy of the government which consists of various kinds of budget and off-budget announcements to tide over evolving global and domestic challenges.
Against the backdrop of frail and fragile growth projections for the Indian economy according to the official estimates, the Union Budget 2025-26 presented on February 01, 2025, sought to enhance economic growth for India along with reviving consumption expenditure, boosting investment sentiments, increasing agriculture growth, and generating employment, among other things. Moreover, the budget places greater emphasis on reviving flagging consumption and investment, two important pillars of economic growth. In this context, the government has unveiled several initiatives in terms of various tax concessions such as reduction in the income tax, simplified GST in terms of compliance and related tax adjustments, etc., so that disposable income with people would rise subsequently leading to a rise in domestic consumption.
Furthermore, the budget 2025 aims to reduce the fiscal deficit and revenue deficit, to 4.4% and 1.5% of GDP in 2025-26 as compared to the revised estimates (RE) of 4.8% and 1.9% of GDP in 2024-25, respectively, to adhere to the targets outlined in the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. This implies that there will be a reduction in the borrowings by the government as compared to the previous year which will prove helpful to maintain the debt sustainability of the government. This has also been reflected in terms of a reduction in the primary deficit from 1.3% as per the RE of 2024-25 to 0.8% of budget estimates (BE) of 2025-26 indicating a respite on debt situation in terms of payment of interest and repayment of principal amount. The government has reduced the spending on both capital and revenue accounts as the RE of 2024-25, compared to the BE of 2024-25 to ensure that the fiscal consolidation path remains on track. This has enabled the government to rein in the borrowing requirements to finance the fiscal deficit. The continuation of a similar trend of policy initiatives by the government in the upcoming period would lead to a lessening of the crowding out of private investment and make more funds available for private sector investment.
It is also important to note that the onus of kickstarting sustainable economic development lies not only with the government sector alone but also with the private sector, which must play an active role by taking risks and reviving the ‘animal spirit’. In this context, the budget emphasizes the need to revive the private sector investment in the country to reap the benefits of the multiplier effect. Corporates and businesses are encouraged through various incentives to expand their business activities, entrepreneurship, and create employment opportunities. Some of the related measures include – an extended tax holiday for the start-ups registered until April 01, 2030, additional funds under the MUDRA scheme for easier loans to small businesses, introduction to the ‘National Manufacturing Mission’ to support the ‘Make in India’ initiative, investment in research development (R&D) to the tune of Rs. 20, 000 crores involving private sector led R&D initiatives to bolster innovation ecosystem in India among others.
This budget further aims to provide the foundation for innovation, digital transformation, and sustainable growth, regardless of the size of the business. It acknowledges that small businesses are innovation hubs, not just job creators. For mid-sized businesses, it encourages change through labour upskilling, automation subsidies, and export incentives. Similarly, it calls on large corporations to lead India’s infrastructure and green transition. In this context, initiatives such as credit democratisation, especially for MSMEs; free chatbots and AI-driven inventory management tools; PLI 2.0 scheme covering drones, toys, and speciality chemicals; IoT-enabled manufacturing with 50% subsidies; Skill India 2.0 encouraging AI and green tech workforce training; Operate and Maintain (O&M) contract system for smart cities, ports, and highways, etc. will prove to be helpful.
The policies outlined in the Budget 2025 provide the scaffolding for the private sector. The private sector must play its part alongside the public sector by aligning its commercial interests with broader development objectives in terms of productivity, efficient resource allocation, employment generation, market-driven solutions, adoption of ethical and responsible business practices, innovation and technological development, adaptability, and coordination with other stakeholders. The private sector enterprises ought to act as a catalyst of economic development and make substantial contributions to building a prosperous and robust economy. The ball is now in India Inc.’s court.
References:
- Press Note on Second Advance Estimates of Annual Gross Domestic Product for 2024-25, February 28, 2025, MOSPI, GOI
- Union Budget Documents, 2025-26
- Budget at a glance, 2025-26
- Economic Survey, 2024-25
- Resolution of the Monetary Policy Committee February 5 to 7, 2025, RBI
- https://www.rblbank.com/blog/banking/tax/union-budget-2025-tax-updates-economic-highlights
- https://www.hdfclife.com/insurance-knowledge-centre/tax-saving-insurance/budget-2025-highlights