Key Takeaways from Union Budget 2025-26: Impact on Economy & Investments
The Union Budget 2025-2026 has introduced significant reforms across various sectors, including banking, energy, infrastructure, agriculture, and taxation. This budget aims to foster economic development. Here are five key takeaways from the budget, as highlighted by major Indian broking firms, which will significantly impact the market and investments.
1. Major Tax Reforms to Boost Consumption
A key highlight is the increase in the tax-free income limit to Rs 12 lakh under the new regime. This move is expected to infuse approximately Rs 1 lakh crore into middle-class households, thereby stimulating consumer spending. Sectors like FMCG, retail, and discretionary spending are expected to benefit significantly.
- Tax-free income limit raised to Rs 12 lakh.
- Expected to boost consumer spending.
2. Massive Agriculture & Rural Development Push
The budget has allocated Rs 1.7 lakh crore, a 21.7% increase, for agriculture and allied sectors. The Kisan Credit Card (KCC) loan limit has been increased from Rs 3 lakh to Rs 5 lakh to support farmers. Additionally, the Dhan Dhanya Yojana has been launched to improve productivity and post-harvest storage.
- Rs 1.7 lakh crore allocated for agriculture.
- KCC loan limit increased to Rs 5 lakh.
- Dhan Dhanya Yojana launched.
3. Infrastructure & Capex Growth
While the capital expenditure (capex) allocation of Rs 11.2 lakh crore is slightly higher than last year, it's below market expectations. The defense outlay increased by 13% (Rs 1.8 lakh crore), but capital expenditure in some sectors remains underwhelming. Road and railway budgets remain stagnant, raising concerns about long-term growth.
- Rs 11.2 lakh crore capex allocation.
- Defense outlay increased by 13%.
- Road & railway budgets remain stagnant.
4. Banking & Insurance Reforms
The FDI limit in the insurance sector has been raised from 74% to 100%, allowing foreign firms full ownership. There have been changes to ULIP taxation, making them less attractive. However, the credit guarantee cover for MSMEs and startups has been doubled, boosting business funding.
- FDI limit in insurance raised to 100%.
- Credit guarantee cover doubled for MSMEs and startups.
5. Strong Push for Green & Renewable Energy
The renewable energy budget has seen a significant hike of 53%, reaching Rs 26,549 crore. Additionally, a Rs 20,000 crore Nuclear Energy Mission for Small Modular Reactors (SMRs) has been introduced. The expansion of PM Surya Ghar Muft Bijli Yojana will also promote clean energy adoption.
- Renewable energy budget increased by 53%.
- Rs 20,000 crore Nuclear Energy Mission for SMRs.
- Expansion of PM Surya Ghar Muft Bijli Yojana.
Fiscal Prudence & Market Borrowing
The government estimates the fiscal deficit for 2025-2026 to be 4.4% of GDP, down from 4.8% in FY 2024-25. Gross market borrowing is projected at Rs 14.82 lakh crore for FY26, while net market borrowing is lower at Rs 11.54 lakh crore. The disinvestment target for FY26 is maintained at Rs 47,000 crore.
Impact and Outlook
These measures are expected to boost consumption, drive rural development, and support various sectors. While the capex spending is modest, the emphasis on green energy and infrastructure provides long-term growth prospects. Sectors like Retail, FMCG, Automobiles, and Travel & Tourism are expected to be key beneficiaries.
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