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Union Budget 2025: Impact on India’s Economy & Market

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Union Budget 2025: Impact on India’s Economy & Market

Union Budget 2025: Impact on India’s Economy & Market

Today, as of February 1, 2025, Nirmala Sitharaman, India’s Finance Minister, presented the Union Budget for the fiscal year 2025-26. The budget is expected to provide insights into the government’s strategy for economic development, infrastructure, and welfare programs.

 

Key Highlights of The Union Budget 2025

  1. Income Tax Relief:  The government has elevated the tax-free income threshold to ₹12 Lakhs to enable spending by the middle class. Further, the personal income tax rate has also been cut, intending to increase consumption savings.
  2. Fiscal Deficit Target: The government forecasts a figure of 4.4% of GDP for fiscal deficit in its union budget 2025. This reflects the government’s commitment to fiscal discipline. Bond borrowing of ₹14.82 lakh crore is also planned to fund this deficit.
  3. Support for Key Sectors: The union budget contains specifically enhanced support for farmers, youths, women, and disadvantaged groups. New measures to strengthen agriculture, manufacturing, and financial services have been introduced. Raising the limit for Foreign Direct Investment (FDI) in the insurance industry to 100% is one step.
  4. Encouraging Local Manufacturing: To support local assembly, import taxes on essential parts for mobile phones have been removed by the government. This policy is anticipated to aid businesses such as Apple and Xiaomi, thus boosting India’s electronics sector.
  5. Critical Minerals Policy: The union budget heralds the removal of customs duties on waste and scrap of critical minerals, covering antimony, cobalt, tungsten, and lithium-ion batteries. This initiative is designed to assure the availability of these materials for manufacture in India.

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Union Budget 2025

Notable Budget Cuts in Several Sectors

While the budget focuses on economic growth and tax relief. However, it has led to notable cuts in several key sectors:

  1. Education: In the education sector, the allocation of ₹1,25,638 crore accounts for roughly 4.5% of the total budget. This is a slight reduction from the previous year, which raises questions about the impact on infrastructure and quality improvement initiatives in the sector.
  2. Transportation: Although the sources do not highlight any particular figure for the transportation sector, the capital expenditure (capex) for the year 2025 26 is estimated at ₹11.2 lakh crore. This number illustrates a qualitative increase in the allocation from the previous year, leading to concerns over the level of funding that is available for infrastructure works, including transportation.
  3. Rural Development: The amount of ₹2,65,808 crore, about 9.5 percent of the total budget, was allocated to rural development. This allocation resonates with the government’s agenda of revitalizing rural economies.
  4. IT and Telecom: The IT and telecom sector received ₹1,16,342 crore which is about 4.2% of the total budget. This allocation indicates the government’s drive towards digital transformation.

These budgetary decisions have brought in the discourse of what may happen to the quality and accessibility of services in the mentioned areas. Stakeholders are appealing against the imbalance which may hinder further progress and aid towards education, transportation, rural development, and the IT and telecom industries.

Impact on the Market

The Stock Exchange registered a significantly positive reaction to the Union Budget 2025, with the essential tax provisions and additional scope for foreign investments resulting in increasing indices. The absence of import levies on mobile parts will help technology stocks, while more value will be added to other spheres such as infrastructure and manufacturing. At the same time, investors remain skeptical concerning the fiscal deficit target and the weakness of the world economy.

Conclusion

The investment objectives of the Union Budget 2025-26 of the Government of India focus on fostering economic growth, creating jobs, encouraging specific industries, and sustaining. The government is keenly aware of the impact of tax cuts, the discipline of public borrowings and spending as well as investment by people in each sector, and strives to tighten India’s broader economy while managing advantages in the middle and lower class over the country. If all these policies are well executed, then the country will be much more prosperous and financially secure. These measures can pave the way to a much-increased level and status in India.

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Union Budget 2025

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