FM Nirmala Sitharaman Presents Eighth Consecutive Budget, Focuses on Middle-Class Relief & Economic Growth

Nirmala Sitharaman

Finance Minister Nirmala Sitharaman today presented a historic eighth consecutive Union Budget, emphasizing measures to support the middle class, encourage private investment, and enhance India’s economic resilience. The Budget aligns with fiscal prudence while addressing concerns of high inflation and stagnant wage growth.

As per the Economic Survey tabled on Friday, India’s economy is expected to grow at 6.3-6.8% in 2025-26. While structural reforms and deregulation are necessary for long-term growth, investment activity is poised for an upswing.

Ahead of the Budget, President Droupadi Murmu, in her address to Parliament, highlighted the government’s commitment to reviving the economy from “policy paralysis” despite global uncertainties caused by the pandemic and geopolitical tensions.

The Budget Session is expected to witness discussions on sixteen key bills, including the Finance Bill 2025, amendments to the Waqf and Banking Regulations Act, and a proposal to merge the Indian Railways and Indian Railways Board Acts.

Key Highlights of the Budget 2025

Finance Minister Sitharaman underscored the government’s continued focus on fostering inclusive growth, economic development, and job creation. The Budget aims to stimulate private investment, uplift household sentiment, and enhance the purchasing power of India’s burgeoning middle class.

The proposed measures in the Budget focus on ten key areas, including:

  • Empowering MSMEs
  • Driving employment-led economic growth
  • Investing in human capital and innovation
  • Ensuring energy security
  • Expanding export opportunities
  • Encouraging innovation and technological advancements

Major Announcements: Strengthening MSMEs & Startups

Micro, Small, and Medium Enterprises (MSMEs) are set to receive a significant investment boost, positioning them as the second growth engine of the Indian economy.

🔹 MSME Budget to double: From ₹5 crore to ₹10 crore over the next five years.
🔹 Startup Loan Limit Doubled: Increased from ₹10 crore to ₹20 crore under the Aatmanirbhar Bharat initiative.
🔹 Government Support for Cooperatives: Strengthened National Cooperative Development Corporation (NCDC) lending operations.
🔹 MSME Contribution: With 36% share in manufacturing and 45% in exports, MSMEs will receive 2.5 times more investment, enabling them to scale, innovate, and generate employment.

Sitharaman stated:
“MSMEs with quality products play a crucial role in our economy. Enhancing their investment 2.5 times will help in employment generation and economic growth.”

Boost for Agriculture & Rural Economy

The government has introduced major initiatives to enhance agricultural productivity and rural employment:

  • National Mission on High-Yield Seeds: To improve agricultural output.
  • Farmer Producer Organizations (FPOs): Engaged in strengthening the Makhana value chain.
  • Kisan Credit Card Loan Limit Raised: From ₹3 lakh to ₹5 lakh for short-term loans.
  • Fisheries Development: Sustainable fishing framework in Andaman & Nicobar and Lakshadweep.

New Tax Regime: Huge Relief for Middle Class

One of the most anticipated announcements was the New Income Tax Regime, which significantly increased the tax exemption limit.

NO income tax payable up to ₹12 lakh! This move is aimed at increasing disposable income and enhancing consumer spending.

Revised Tax Slabs Under the New Regime

  • ₹0 – ₹4 lakh → 0%
  • ₹4 – ₹8 lakh → 5%
  • ₹8 – ₹12 lakh → 10%
  • ₹12 – ₹16 lakh → 15%
  • ₹16 – ₹20 lakh → 20%
  • ₹20 – ₹24 lakh → 25%
  • ₹24 lakh+ → 30%

This restructuring is expected to boost household consumption and promote economic stability.

New Income Tax Bill Next Week

FM Sitharaman emphasized:
“My tax proposals aim to promote ease of doing business, encourage voluntary compliance, and reduce tax burdens, particularly for the middle class.”

Entrepreneurship & Employment Initiatives

  • ₹10,000 crore additional funding for startups, doubling the government’s existing contribution.
  • ₹2 crore term loans for 5 lakh first-time entrepreneurs, with a focus on women, SC, and ST communities.
  • New Manufacturing Mission to enhance domestic production and drive industrial growth.
  • Labour-Intensive Industry Support: Measures to increase employment and productivity in key sectors.
  • Credit Guarantee Cover Raised to ₹20 crore, easing credit access for businesses.

Boost to Trade & Infrastructure Development

  • BharatTradeNet (BTN): A unified digital platform for trade documentation & financing solutions.
  • ₹1.5 Lakh Crore Interest-Free Loans: Allocated for state infrastructure projects under a 50-year tenure.
  • Revised Tariff Rates: Reduction from 15 to 8 for ease of trade.
  • Foreign Direct Investment (FDI) in Insurance: Proposal to increase FDI limit to 100%.

Additionally, the Jan Vishwas Bill 2.0 will be introduced to decriminalize over 100 provisions, creating an investment-friendly index for states in 2025.

With record-breaking income tax reforms, MSME expansion, and investments in innovation, the Budget aims to fortify India’s economic resilience while fostering inclusive development.

Industry Insights:

Sanjiv Bajaj, Jt. Chairman & MD, BajajCapital, stated, “The recent budget has been quite optimistic, and the changes it brings could have a big impact on Indians across the board. By opening up the insurance sector to more foreign investment, it’s expected to lead to better coverage and more affordable options, especially for underserved groups like SMEs, startups, and gig workers. This means that more people could access insurance, which is still relatively low compared to global standards.

The increase in FDI could also bring in fresh capital and create healthier competition in the market. For businesses, it could mean more tailored solutions and smarter risk management, which will help them thrive in a competitive environment.

For individuals, especially senior citizens, the increased tax deductions are a welcome change. The ₹1 lakh deduction on interest income is a nice boost for their savings. On top of that, the new tax exemptions for people earning up to ₹12 lakh should directly impact disposable income, giving people more freedom to save or spend.

Overall, this budget seems like a positive step forward, with the potential to really help both businesses and individuals in India. The focus on increasing FDI, expanding insurance access, and providing more tax relief is definitely an optimistic approach to driving growth and improving financial security.”

Satish Kumar Kalra, MD & CEO, North East Small Finance Bank, stated, “The Union Budget 2025-26 reflects a strategic push towards financial inclusion, rural development, and MSME growth. Initiatives like the enhanced Kisan Credit Card limit to ₹5 lakh and new taxation reforms demonstrate a balanced approach to fostering economic empowerment. These measures are particularly encouraging for regions like the Northeast, where increased access to credit and financial services can drive entrepreneurship and community upliftment.”

Rushabh Gandhi, MD & CEO at IndiaFirst Life Insurance mentioned, 

1) The government’s decision to allow 100% FDI in insurance is a welcome move. It will attract more investments and create employment opportunities in India. However, its impact on the Indian market, driven largely by distribution, may be limited in the immediate future.

2) The reduction in tax structure is expected to increase disposable income and savings, benefiting the insurance sector as insurance awareness grows. Although the shift to the new tax regime may impact life insurers due to the loss of Section 80C tax benefits, the positive effect of higher disposable income is expected to offset this impact.

3) The removal of conditions for GIFT City insurance entities under Section 10(10D) will directly benefit Indian customers. As the first Indian insurer to set up operations in GIFT City, IndiaFirst Life is well-positioned to leverage this advantage. Additionally, changes to the current tax regime’s threshold for taxing insurance policies – Rs 2.50 lakh for ULIPs and Rs 5 lakh for non-ULIPs – may boost investment in foreign currency-denominated products and bring more investment to India.

Srinivasan, MD & CEO,  Galaxy Health Insurance Company Limited, stated, “It is a very positive and growth oriented budget. There are many reforms which will contribute to ease of doing business and faster economic growth.

The increase in FDI in insurance sector from 74% to 100% is very positive as it will help in bringing large capital required by insurance sector for the high growth the sector is expected to post towards the goal of Insurance for All.

The healthcare sector has received a boost with many measures. The increase in medical seats will add to availability of doctors for better health care. The setting up of Day care cancer centres in all District hospitals is a welcome measure. The PMJAY cover for one crore GIG workers will bring health insurance for large number of people.

The reduction in personal tax will increase the disposable incomes of people and will facilitate them to focus on availing health insurance which is very important for people.

Extension of tax breaks for insurance companies in IFSC GIFT CITY for another 5 years is welcome.”

Ashwani Dhanawat – ED and Chief Investment Officer, Shriram General Insurance, stated, “The Union Budget 2025 outlines a strategic approach to sustainable economic growth, with a focus on infrastructure development, fiscal consolidation, and innovation. The fiscal deficit target of 4.8% for FY25, combined with ₹1.5 lakh crore in interest-free loans for states, supports regional development and public-private partnerships.

A key highlight is the proposal to raise the FDI limit in the insurance sector to 100%, enhancing foreign capital inflows and sectoral competitiveness. The new income tax slabs, particularly the nil tax up to ₹12 lakh, will stimulate domestic consumption and savings.

The budget also emphasizes technology and innovation, with initiatives like the deep-tech fund and AI-focused education. Rural development is prioritized through measures like the Makhana Board in Bihar and the National Institute of Food Technology. Overall, Budget 2025 effectively balances fiscal prudence with long-term growth, positioning India for a competitive global economy.”

Sharad Mathur, Managing Director and CEO, Universal Sompo General Insurance said, “The recent increase in the foreign direct investment (FDI) limit from 74% to 100% in the insurance sector is another significant development for the industry, which is expected to accelerate insurance inclusion across the nation. This move is likely to attract substantial foreign capital while also fostering innovation and improving service quality through technological advancements. As a result, global insurance companies can now invest fully, and we anticipate the emergence of innovative products and services tailored to meet the diverse needs of Indian consumers.”

Sumit Bohra, President, the Insurance Brokers Association of India (IBAI), mentioned, “The announcement of enhancement in FDI limit in the insurance sector to 100% in the Union Budget 2025 is a positive move. This will now help to attract more foreign capital, enhance underwriting capacity, and foster innovation through global partnerships. The government’s acknowledgment of insurance as a critical pillar for financial security is encouraging. Also the decision on nil income tax payable up to INR 12 lakh, this segment of consumers should become target for buying insurance increased cover. This measure of the government can contribute to increasing insurance penetration.”

Deepak Chand Thakur,  CEO, NPST mentioned that, “The Union Budget FY 2025-26 delivers a comprehensive framework to stimulate growth, enhance investment, and provide direct financial relief.

The key highlight—no tax obligation on income up to ₹12.75 lakh—marks a significant shift in personal taxation. By restructuring slabs and rates across the board, this measure is set to increase disposable income, fueling household consumption, savings, and investment.

A direct consequence of increased discretionary spending will be a rise in digital transactions, further accelerating UPI adoption. As UPI cements its role as the dominant digital payment rail, higher transaction volumes are expected to follow.

The revamped PM SVANidhi scheme introduces enhanced micro-loans from banks, UPI-linked credit cards with a ₹30,000 limit, and structured capacity-building initiatives. This policy shift positions UPI beyond a payment rail into a fully integrated digital credit ecosystem, bridging India’s credit gap. With an estimated 10 million street vendors gaining access to formal credit, the initiative strengthens financial inclusion while driving digital-first lending.

The introduction of the Grameen Credit Score Framework will significantly expand rural access to credit, while streamlined KYC processes and a revamped registry by 2025 will enhance financial participation.

The structural reforms establish a robust foundation for inclusive economic growth, ensuring that investment, digital finance, and consumer-driven expansion work in tandem.”

Debopam Chaudhuri, Chief Economist, Piramal Group, said “Debt markets should benefit from the budget’s fiscal management. Despite economic growth falling behind expectations in FY25, Fiscal Deficit of 4.8% was better than targeted 4.9%. Also, though Economic Survey expected growth to remain restricted at or under 6.8% in FY26, central government fiscal deficit has been forecasted to be 4.4%. Another 15-basis point reduction in the 10-year government security is expected after today’s announcements. No other major economy has been able to reduce fiscal deficit at this pace post COVID, bolstering India’s place as an upcoming economic power. The tax cut led additional income available to India’s vast middle class and aspiring population is expected to override the slow public capex in FY26 and provide the Indian economy with the necessary boost to come out of the current slowdown.”

Yogesh Agarwal, CEO and Founder, Onsurity, stated, “The decision to allow 100% FDI in the insurance sector is a game-changer for India’s financial landscape. It will bring in much-needed capital, enhance competition, and improve insurance penetration—especially for underserved segments like SMEs, startups, and gig workers. 

With global expertise and resources, we can expect better risk management, smarter underwriting, and more tailored solutions for businesses of all sizes. This move strengthens India’s insurance ecosystem and aligns with Onsurity’s vision of making healthcare and protection accessible to millions.”

Kishor Lodha, Chief Financial Officer, UGRO Capital, “The Union Budget 2025 has once again established the Government’s continued support for the MSME sector. And there are few takeaways for the sector, the limits for MSME classification have been enhanced from 2 to 2.5 times, which will benefit the sector. 

The guarantee scheme for micro and small enterprises has been expanded from a maximum limit of ₹5 crore to ₹10 crore, which will increase credit flow to this segment. Additionally, 10 lakh credit cards will be issued to MSMEs, helping them manage working capital more effectively. Several measures have also been announced for startups, further strengthening the Startup India mission. 

Overall, this Budget reinforces the Government’s commitment to empowering MSMEs and startups, driving sustained economic growth and job creation.”

Nirav Choksi, CEO & Co-Founder, CredAble stated, “Overall the budget is a strong and stable one—a positive step towards India’s development goals—which is the need of the hour. The credit schemes for the MSME sector and startups such as the customised credit cards and a dedicated INR 10,000 crore Fund of Funds will be critical for deepening financial inclusion. However, the focus should now shift towards simplifying access to these schemes, particularly for businesses in tier 2 and 3 cities. 

With the introduction of the DPI platform—Bharat Trade Net—we’re seeing a proactive stance to digitalise and streamline trade financing. While the KYC registry overhaul is a great move, its successful implementation will be key. This budget is a progressive roadmap for economic growth, with a focus on improving the ease of doing business and ensuring a more conducive environment for MSMEs and startups with targeted financial schemes and a clear focus on improving access to working capital. Backed by a dedicated manufacturing mission, and climate-friendly manufacturing initiatives—India is taking decisive steps to strengthen its industrial competitiveness on the global stage. ”

Ketan Mehta, CFO, CredAble mentioned that, “The budget rightly focuses on expanding financial support for MSMEs, a sector crucial in positioning India as a global manufacturing hub and responsible for 45% of the nation’s exports. Budget 2025 broadens MSME eligibility, increasing turnover up to INR 500 crore. While this, along with an INR 10 crore credit guarantee scheme for MSMEs, is promising, how quickly and efficiently businesses can secure these funds will determine its true impact. Additionally, DPI-enabled export financing, combined with term loans of up to INR 20 crore for well-run export-oriented MSMEs, will empower businesses to step into international markets. Providing the right means to scale would also include building manufacturing and export competitiveness through digital trade networks and strong buyer-supplier ecosystems.”

Jaya Vaidhyanathan, CEO, BCT Digital, mentioned that, “The budget takes a bold, strategic approach to economic growth, balancing fiscal incentives, credit expansion and sustainability to drive long-term resilience and global competitiveness. It boosts disposable income through reduced personal income tax and higher TDS limits for senior citizens and rent, stimulating consumption and economic momentum. Targeted credit expansion for farmers and MSMEs will inject vital liquidity, accelerating sectoral growth, while the transition to cashflow-based lending reinforces financial stability. The Bharat Trade Net and NABFID credit enhancements will sharpen India’s export competitiveness amid global headwinds. Moreover, a strong push for workforce participation, particularly for women, and a firm commitment to green initiatives will drive sustainable, inclusive development. I expect these measures to collectively lay the foundation for long-term economic resilience and nation-wide growth.”

Akash Sinha, CEO and Co-founder, Cashfree Payments stated, “The Union Budget marks a decisive step toward positioning India as a global leader in innovation, with a clear focus on startups, technology, and progressive regulations. The launch of a new ‘Fund of Funds’ will energise the startup ecosystem, enabling creation of the next wave of tech and deep-tech ventures. Also, the introduction of a revamped central KYC system will drive greater transparency and trust within the financial ecosystem. Establishing a Digital Public Infrastructure for international trade will simplify cross-border financing, enhancing India’s role as a key player in global commerce. These initiatives will boost India’s fintech growth and strengthen its role in the digital economy.”

Venkatraman Venkateswaran – Group President & Chief Financial Officer, Federal Bank mentioned that, “It is a growth-oriented budget, focusing on our journey towards Viksit Bharat. Labour-intensive sectors like agriculture, footwear, leather, toys, and food processing, which are largely MSME sectors, have received a boost. This budget complements our focus on the MSME sector and presents an opportunity to further strengthen our relationship with customers and finance their growth. The personal income tax rate reduction also provides a boost from the consumption side.

The fiscal consolidation roadmap outlined last year stays the course, and government capex spending will provide impetus for infrastructure and job creation.

In summary, it is a balanced budget with a boost to consumption.”

Vinod Francis, GM-Chief Financial Officer, South Indian Bank, mentioned, “ Amidst a global environment of rising uncertainty, the Union Budget by the honourable finance minister is reassuring that our economy is stable and aligned towards long term progress.

Policymakers prudently unfurled a number of reforms aimed at increasing disposable income and reviving consumption in the Indian economy. Their prudence in balancing macro stability must be lauded, as they have stuck to the fiscal prudence roadmap by setting a fiscal deficit target of 4.4% for FY26 while also spurring consumption.

Moreover, the government allocating a Capex of Rs. 11.21 lakh crores for FY26 in the most productive sectors of the economy would likely have a domino effect and accelerate capital formation in the economy.”

We second the government’s recognition of MSMEs being the second engine driving India’s manufacturing growth. The decision of allotting Rs. 1.5 lakh crore would further spur capacity expansion, creating a ripple effect that would have a positive effect on growth, aiding India’s development.”

Shailesh Dhuri, CEO, Decimal Point Analytics, stated, “India’s 2025–26 budget exemplifies a calibrated equilibrium: fiscal consolidation converges with targeted tax relief, green-energy investments, and rural empowerment. Yet structural inertia persists—tax code complexity, fossilised bureaucracy, stalled privatization, and labour reforms languish. The Viksit Bharat 2047 vision advances however speed could be faster.”

Stay tuned for more updates and reactions on the Union Budget 2025!

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