Indian Budget Breakdown 2025

Overview:

The Union Budget 2025-26 sets the stage for India’s next phase of economic expansion, balancing fiscal prudence with targeted investments. With a focus on sustaining the country’s growth momentum, the government has outlined a comprehensive strategy that emphasizes infrastructure development, employment generation, and inclusive progress. The budget reinforces India’s long-term vision of Viksit Bharat, leveraging structural reforms, digitalization, and sectoral growth to enhance global competitiveness. While acknowledging global uncertainties, the Finance Minister has reaffirmed the government’s commitment to macroeconomic stability, private sector participation, and social welfare, ensuring a well-calibrated approach to fiscal management.

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Deficit Trends:

           Source: indiabudget.gov.in

Over the past decade, India’s fiscal deficit has followed a declining trajectory, reflecting the government’s commitment to responsible fiscal management. In the aftermath of the COVID-19 pandemic, the deficit peaked at 9.2% of GDP in 2020-21, driven by stimulus measures and revenue shortfalls. Since then, a steady consolidation has been observed, with the deficit reducing to 6.4% in 2022-23 and 5.9% in 2023-24. The Revised Estimate for 2024-25 stands at 4.8%, and the government has further tightened its fiscal stance by targeting 4.4% in 2025-26. This approach aims to reduce debt dependence while ensuring sustained capital investment, reinforcing India’s long-term economic resilience.

Expenditure of Government of India

Source: indiabudget.gov.in

Over the past decade, India’s total expenditure has steadily increased, reflecting the government’s focus on infrastructure development, social welfare, and economic resilience. From ₹23.1 lakh crore in 2015-16, expenditure has more than doubled to ₹50.65 lakh crore in 2025-26, driven by rising capital investment and higher allocations for welfare schemes.

• Capital expenditure has seen a fourfold increase from ₹2.3 lakh crore in 2015-16 to ₹11.11 lakh crore in 2025-26, emphasizing long-term growth.
• Revenue expenditure, covering essential services and subsidies, has risen from ₹20.8 lakh crore in 2015-16 to ₹39.54 lakh crore, supporting social security and governance.
• A notable surge occurred post-2020, as the government ramped up spending to counter pandemic-driven economic slowdown, peaking at ₹35.1 lakh crore in 2020-21

Source: indiabudget.gov.in

The Budget 2025-26 maintains a strategic allocation of expenditure, ensuring a balance between developmental spending and fiscal prudence. The total expenditure is estimated at ₹50.65 lakh crore, with a strong focus on capital investment and social sector schemes.

• Capital expenditure is set at ₹11.11 lakh crore, continuing the government’s push for infrastructure development, including transport, energy, and urban expansion.
• Revenue expenditure, accounting for ₹39.54 lakh crore, includes allocations for healthcare, education, and rural development, reinforcing the government’s social welfare priorities.
• Interest payments remain a significant component at ₹11.2 lakh crore, highlighting the importance of debt management.
• Subsidies, including food, fertilizer, and fuel, amount to ₹3.8 lakh crore, ensuring support for vulnerable sections while aiming for targeted efficiency.Defense spending is ₹6.2 lakh crore, reflecting a commitment to national security and modernization of the armed forces.

Revenue Receipt Breakdown:

Source: indiabudget.gov.in

India’s tax revenue has witnessed consistent growth over the last decade, supported by structural reforms, digitalization, and economic expansion. From ₹14.6 lakh crore in 2015-16, net tax revenue has increased to ₹28.37 lakh crore in 2025-26, reflecting enhanced compliance, widening of the tax base, and buoyant economic activity.

• Direct taxes, primarily corporate tax and personal income tax, have grown steadily, contributing over 55% of total tax revenue in recent years.
• GST, introduced in 2017, has streamlined indirect tax collection, with GST revenues consistently surpassing ₹1.5 lakh crore per month since 2022.
• Customs and excise duties have seen fluctuations due to policy changes and adjustments in fuel taxation but continue to be significant revenue sources.

Source: indiabudget.gov.in

India’s gross revenue receipts have expanded in line with economic growth, rising from ₹17.8 lakh crore in 2015-16 to ₹34.96 lakh crore in 2025-26. This growth has been fueled by higher tax collections, non-tax revenues, and disinvestment proceeds.

• Tax revenue remains the dominant component, contributing around 80% of total receipts.
• Non-tax revenue, including dividends, interest receipts, and fees, is projected at ₹3.2 lakh crore in 2025-26.
• Disinvestment receipts, while volatile, have contributed to fiscal consolidation efforts, with targeted proceeds of ₹50,000 crore in 2025-26.

Fiscal Account FY25-26: Receipt (YoY Trend)

Key Observations from the Chart (YoY Change – 2024-25 RE to 2025-26 BE):

• Gross Tax Revenue Growth: The gross tax revenue is projected to increase from ₹38,53,455 Cr (2024-25 RE) to ₹42,70,233 Cr (2025-26 BE), representing a YoY growth of 10.8%.
• Direct vs. Indirect Tax Growth:
  • Direct tax collection is projected to grow from ₹22,37,000 Cr to ₹25,20,000 Cr, a YoY increase of 12.6%.
  • Indirect tax collection is projected to grow from ₹16,16,455 Cr to ₹17,50,233 Cr, a YoY increase of 8.3%.
• Fiscal Prudence: The fiscal deficit as a percentage of GDP is projected to decrease from 4.90% (2024-25 RE) to 4.40% (2025-26 BE), a YoY reduction of 0.5 percentage points.
• Borrowings: The planned borrowings are projected to decrease from ₹15,69,527 Cr (2024-25 RE) to ₹15,68,936 Cr (2025-26 BE), a YoY decrease of 0.004%. This decrease is minimal, essentially flat.

Money flow:

Source: indiabudget.gov.in

Source: indiabudget.gov.in

The Budget 2025-26 outlines several sectoral allocations and announcements aimed at enhancing growth and development across various sectors.

 Key details include:

Agricultural Growth Initiatives:

• Launch of the Prime Minister Dhan-Dhaanya Krishi Yojana, focusing on enhancing productivity in 100 low-performing districts. It aims to improve agricultural practices and credit availability for farmers, impacting approximately 1.7 crore farmers. 
• A Rural Prosperity and Resilience program will address under-employment in agriculture through skilling and investment, particularly targeting rural women and youth.
• The introduction of a Mission for Aatmanirbharta in Pulses to achieve self-sufficiency in pulse production, enhancing sustainability and economic benefits for farmers. 

Infrastructure spending:

The Indian government’s focus on infrastructure development is further demonstrated by its ambitious asset monetization plan. For the fiscal year 2023-24, asset monetization efforts generated approximately ₹97,000 crore, with key contributions from the Ministry of Road Transport and Highways and the Ministry of Coal. Building on this success, the government has unveiled a second asset monetization initiative for the 2025-30 period, targeting an impressive ₹10 lakh crore, which will be reinvested into new infrastructure projects. The National Highways Authority of India (NHAI) has already identified 33 assets for monetization in the 2024-25 fiscal year, further solidifying the government’s commitment to funding and expanding India’s infrastructure landscape.

1. AI Center for Education:

• A new AI center for education will be established with a significant investment of ₹500 crore, aiming to enhance the use of artificial intelligence in educational sectors across India.

2. Expansion of Medical Education:

• The government plans to add 10,000 more medical seats in the coming year, contributing to a target of 75,000 seats over the next five years to address the growing demand for healthcare professionals.

3. Day Care Cancer Centers:

• Cancer daycare centers will be set up in all district hospitals within the next three years, with 200 centers planned for the fiscal year 2025-26 to improve cancer treatment accessibility at the grassroots level.

5. PM SVANidhi Scheme Revamp:

• The PM SVANidhi scheme will be revamped with increased bank loans, the introduction of UPI-linked credit cards (₹30,000 limit), and capacity-building support for street vendors and micro-entrepreneurs.

6. Social Security for Gig Workers:

• Nearly 1 crore gig workers will receive identity cards, registration on the e-Shram portal, and access to healthcare under the PM Jan Arogya Yojana, enhancing their social security benefits.

Export focus:

To boost exports, the Budget 2025-26 introduces several strategic initiatives aimed at enhancing competitiveness and supporting key sectors:

1. Export Promotion Mission:
   1. Establishment of a dedicated Export Promotion Mission to assist 10,000 MSMEs in its first year, aiming for a 15% increase in their export volumes by 2026.
2. BharatTradeNet Platform:
   1. Development of a unified digital platform called BharatTradeNet to streamline international trade documentation and financing, enhancing ease of doing business for exporters.
3. Support for Global Supply Chains:
   1. Focus on developing domestic manufacturing capacities to integrate better into global supply chains, particularly in sectors adopting Industry 4.0 technologies.
4. Enhancements in Export Credit Systems:
   1. Export credit systems will be strengthened to help MSMEs overcome non-tariff barriers in foreign markets, supporting a significant increase in export volumes.
5. Incentives for Handicraft Sector:
   1. Export timeline for the handicraft sector extended to one year, with a possible further extension of three months, to help exporters meet global demand.
6. Reduction in Export Duties:
   1. Export duties on items such as crust leather have been reduced to 0%, making Indian leather products more competitive in international markets.
7. Sector-Specific Initiatives:
   1. Aquaculture & Marine:
      1. Reduced duties on frozen fish paste (30% → 5%) and fish hydrolysate (15% → 5%) to lower input costs for seafood exports.
   1. Chemicals & Pharmaceuticals:
      1. Reduced duties on synthetic flavoring essences (100% → 20%) and Sorbitol (30% → 20%), supporting food & beverage and pharmaceutical industry exports.
      1. Duty exemptions for 36 additional medicines to strengthen pharmaceutical exports.
   1. Electronics & IT Hardware:
      1. Lower duties on key components for mobile phones and lithium-ion batteries to encourage export-led manufacturing and boost global competitiveness.

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Taxation Changes & Reforms:

• A tax payer with an annual income of ₹12,00,000 will benefit from a tax reduction of ₹80,000
• At an income level of ₹18,00,000, the benefit will amount to ₹70,000 (30% of tax payable under the previous framework)

TDS/TCS Rationalization:

1. To reduce compliance burdens, the limits for Tax Deducted at Source (TDS) for various income sources have been significantly raised:
   1. For senior citizens, the limit for interest income has been doubled from ₹50,000 to ₹1,00,000.
   1. The TDS threshold for rent has been increased from ₹2,40,000 to ₹6,00,000.
2. Also, the threshold for Tax Collected at Source (TCS) on remittances under the Liberalized Remittance Scheme (LRS) is raised from ₹7,00,000 to ₹10,00,000. Moreover, TCS on education-related remittances from specified financial institution loans will be removed.
3. Encouraging Voluntary Compliance: In an effort to enhance taxpayer trust, the Government has extended the time limit to file updated returns from two years to four years. This initiative is designed to encourage individuals to correct any omitted income reporting.
4. Compliance Burden Reduction: The proposal aims to alleviate the compliance burden for small charitable trusts by increasing their registration period from five to ten years, and by streamlining the processes for minor defaults

Overall, these reforms are anticipated to not only simplify the tax process but also enhance the disposable income for many taxpayers, fostering a tendency toward increased savings and investments in the economy. The estimated revenue foregone due to these direct tax proposals is around ₹1 lakh crore, with an additional ₹2,600 crore expected from indirect tax changes.

KYC 2.0 Update:

The Indian government announced the rollout of a revamped Central Know Your Customer (CKYC) registry, aiming to simplify and unify the KYC process across various financial sectors. This initiative seeks to address longstanding challenges investors face due to fragmented KYC procedures mandated by different regulators overseeing mutual funds, the National Pension System (NPS), insurance, and banking.

Key Features of the Revamped CKYC Registry:

• Unified KYC Process: The revamped CKYC system will standardize KYC procedures across financial sectors, allowing investors to complete their KYC process once and have it applicable across various financial instruments.
• AI-Powered Verification: Advanced artificial intelligence algorithms and face-matching technology will be employed to verify identities and detect duplicate records, enhancing the accuracy and efficiency of the KYC process.
• Integration with Digital Platforms: The CKYC will integrate with platforms like DigiLocker, enabling customers to store and retrieve their KYC documents securely and share them seamlessly with financial institutions.
• Enhanced Data Security: The system will implement measures such as masking KYC identifiers to protect sensitive information, thereby enhancing data privacy and security.

Benefits:

• Streamlined Onboarding: By eliminating the need for multiple KYC processes across different financial products, the revamped CKYC system is expected to significantly improve the onboarding experience for investors, making it more efficient and user-friendly.
• Encouraging Investment: A simplified and unified KYC process is anticipated to encourage more individuals to invest, as the reduced complexity lowers entry barriers for new investors.
• Cost Efficiency: Financial institutions can reduce operational costs by avoiding redundant KYC processes and leveraging a centralized repository for customer verification.

RBI Guidelines on Periodic KYC Updation:

The Reserve Bank of India (RBI) has established a risk-based approach for the periodic updation of KYC information:

• High-Risk Customers: KYC information must be updated at least once every two years.
• Medium-Risk Customers: Updation is required at least once every eight years.
• Low-Risk Customers: Updation should occur at least once every ten years.

These intervals are calculated from the date of account opening or the last KYC updation, whichever is later.

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Our View:

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, comes at a time when the Indian economy is showing signs of moderation, with slower growth in the first half of FY25. Contributing factors include a reduction in government spending, tightening of credit in unsecured lending, a slowdown in urban consumption, extended monsoons, and inflationary pressures. Against this backdrop, the expectations from the budget were high, with hopes that it would stimulate consumption and revitalize economic growth.

One of the key highlights of the budget is the significant tax relief aimed at individuals earning up to ₹12 lakh. This landmark move is designed to boost disposable income, particularly for the masses, and provide a substantial push to consumption. By directly targeting the middle class and rural populations, the budget signals a shift toward a consumption-driven growth model. The government appears to be moving away from the previous focus on infrastructure creation, which defined the past decade, and is instead placing a stronger emphasis on consumption, especially in rural and middle-class segments.

The past decade’s economic trajectory was marked by large-scale infrastructure development—roads, bridges, metros, and other projects—showcasing the ruling party’s focus on capacity building. However, this infrastructure boom came at the cost of reduced allocations for social welfare schemes. The 2025 budget attempts to address this by focusing more on consumption as a means to drive economic recovery. This approach could generate a cascading effect on the economy, indirectly boosting private sector capital expenditure (capex), which has remained sluggish for years. By revitalizing consumption, the government hopes to trigger a cycle of economic activity that will spur demand across sectors.

As a result, the market could see a shift in investment patterns, with increased attention on consumption-driven stocks. In contrast, the focus on capital expenditure-related sectors may see some moderation. The anticipated growth in consumption could positively impact industries tied to consumer goods, retail, and rural sectors.

Overall, while the budget continues to prioritize infrastructure and fiscal prudence, its strategic shift towards consumption-led growth marks a notable change in India’s economic regime. By focusing on the masses and rural areas, it aims to reignite demand, ultimately benefiting both private investment and consumption-related sectors in the coming years. However, our outlook is cautiously optimistic, as we had anticipated a more capex-driven budget with some focus on consumption. Instead, this budget leans heavily towards consumption-focused reforms. Given this shift, we have opted for a “wait and watch” approach regarding urban consumption growth. We recommend that investors exercise caution by opting for systematic and staggered investments at this stage.

While this populist approach could potentially boost private capex, which has been sluggish, the outcome remains uncertain, and it’s prudent to monitor how these reforms impact the broader economy over the next few quarters.

Disclaimer:

This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.

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