Overview of Union Budget 2025 Expectations
The Union Budget 2025 is set to focus on innovative measures aimed at bolstering India’s infrastructure, agriculture, MSMEs, and sustainability initiatives. As Finance Minister Nirmala Sitharaman prepares to unveil the budget on February 1, 2025, key proposals are expected to shape India’s journey towards inclusive growth, resilience, and global competitiveness.
Key Recommendations and Focus Areas
1. Infrastructure Development
The government may introduce alternate funding mechanisms like Tax-Free Bonds and Tax-Paid Bonds to finance infrastructure projects. These options could reduce financing costs for well-rated borrowers and accelerate infrastructure development.
2. Agriculture and Allied Sectors
A proposed Credit Guarantee Fund Trust for Agri & Allied Sectors (CGFTAAS) is expected to act as a credit accelerator, ensuring coverage for fresh agricultural loans, including Agri Value Chain Financing (AVCF). The implementation of the 2021 report on the agricultural value chain is also recommended to enhance efficiency in the sector.
3. Housing Sector
The Priority Sector Lending (PSL) definition for affordable housing could be revised. Projects costing ₹65 lakh in metro cities and ₹50 lakh in other regions may qualify as affordable housing, updating the criteria set in 2018.
4. MSME Sector Support
The budget is likely to promote production-linked incentives (PLIs) for key sectors such as textiles, garments, handicrafts, food processing, leather, and electronics. Additional recommendations include:
- Increased allocation to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
- Incentives for banks to expand MSME loan coverage.
5. Green Economy and Sustainability
To strengthen India’s climate commitments under the Nationally Determined Contributions (NDC), the government may introduce a green taxonomy to channel funds towards sustainable projects. Incentives for bioenergy adoption, subsidies for advanced equipment, and tax benefits for sustainable energy solutions are also anticipated.
6. Disaster Management
A Disaster Pool modeled after existing Nuclear and Terrorism Pools may be introduced to mitigate financial risks associated with natural disasters. This public-private insurance initiative could provide critical coverage for disaster recovery efforts.
7. Education and Innovation
The education sector could see:
- Collaborations with global institutions.
- Overseas centers for Indian institutes to attract international students, positioning India as a global knowledge hub.
Industry Expectations
Startups:
Imteyaz Ansari, Founder of Azmarq Technovation, anticipates simplified taxation processes, single-window clearance for regulatory approvals, and investments in digital infrastructure. These measures could reduce compliance burdens and fuel innovation across India’s startup ecosystem.
Green Energy Sector:
Varun Puri, Managing Director of Green Power International Pvt. Ltd., highlights the need for bioenergy incentives and streamlined regulatory processes to accelerate India’s transition to renewable energy. He adds that subsidies and financial support for advanced energy technologies could bolster India’s energy security and combat pollution.
Hospitality Sector:
K.B. Kachru, President of the Hotel Association of India, calls for infrastructure status, rationalized tax rates, and MICE (Meetings, Incentives, Conferences, and Exhibitions) destination development to boost tourism’s GDP contribution.
Gold Industry:
The World Gold Council (WGC) has cautioned against raising import duties on gold, which could increase smuggling and higher domestic prices. Instead, the WGC emphasizes maintaining the positive momentum established by last year’s tariff reductions.
Market Sentiment and Global Impacts
The Indian equity markets are bracing for a significant week ahead, influenced by the budget, Q3 earnings, and global macroeconomic data. Ajit Mishra, SVP at Religare Broking, notes that investors are optimistic about measures aimed at boosting consumption while maintaining fiscal discipline.
Manish Goel, Founder of Equentis Wealth Advisory, suggests that India could seize export opportunities due to shifting global trade policies, particularly in light of US President Donald Trump’s trade reforms. However, these opportunities come with challenges, as Indian businesses may face more competitive markets and higher import costs.
Technology and IT Industry Wishlist
The IT sector, represented by Nasscom, advocates for:
- A deeptech fund to support startups.
- Simplified tax deferment policies for Employee Stock Option Plans (ESOPs).
- Expanded utilization of SEZ reinvestment reserves.
These measures could help the $250 billion IT industry navigate geopolitical risks and sustain its export-led growth trajectory.
Conclusion
The Union Budget 2025 promises to be pivotal, with far-reaching implications for India’s economic trajectory. By addressing critical areas such as infrastructure, agriculture, MSMEs, sustainability, and innovation, the government aims to foster inclusive growth and resilience. As sectors await detailed announcements, the budget is set to align with India’s broader vision of becoming a $5 trillion economy.
