Budget 2025-26: A Game Plan for Growth Without Inflation?

As India steps into a crucial economic phase, the Union Budget 2025-26 has set a clear direction—growth without inflation. The government’s strategy focuses on disciplined fiscal management, massive capital expenditure, and structural reforms, ensuring the economy moves forward without the fear of price surges. But how does this budget achieve such a delicate balance?

Borrowing for Growth, Not for Expenses

One of the most striking aspects of this budget is its approach to government borrowing. Unlike previous years, where borrowings were often used to finance revenue expenditure, this time, the entire ₹15.68 lakh crore borrowing is being directed towards capital investment.

“When we show the numbers, there is nothing hidden elsewhere. Our entire borrowings are going into CAPEX – nothing could be better than this. It's a non-inflationary budget," said Finance Secretary and Secretary, Department of Revenue, Tuhin Kanta Pandey, at a FICCI conference.

With ₹15.48 lakh crore allocated for capital expenditure in FY 2025-26—₹11.21 lakh crore in direct central government spending and ₹4.27 lakh crore as grants to states—the focus is clear: build for the future. The move is expected to fuel infrastructure development, boost employment, and create ripple effects across industries.

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Fiscal Discipline: A Promise Kept?

The government’s promise of fiscal consolidation seems to be on track. The fiscal deficit has been reduced to 4.8% of GDP, beating the projected 4.9%, with a roadmap to further lower it to 4.4% in the next fiscal year.

This reduction signals strong economic discipline, ensuring that growth is not fueled by excessive government spending but by structural improvements and investment. The government’s strategy also includes returning ₹1 lakh crore to the middle class through market mechanisms rather than direct government spending.

"Whether citizens save or consume these funds, both outcomes benefit the economy – savings strengthen bank liquidity, while consumption benefits spread across industries," Pandey explained.

The guiding philosophy behind this budget? "Growth with fairness, trust first, economic stimulus, and fostering entrepreneurship."

Simplifying Taxes: A Friendlier Approach?

Taxation in India has long been viewed as a complex, sometimes adversarial process. This budget aims to change that narrative with a ‘PRUDENT’ tax framework—Proactive and professional, Rule-based, User-friendly, Data-driven, creating an Enabling environment, Non-intrusive, and Technology-driven with transparency.

CBDT Chairman Ravi Agrawal emphasized that the tax department is now focusing on participation rather than confrontation.

“It is no longer an adversarial tax department. It is a participative approach aimed at economic growth and improved governance,” he said

Some of the major tax administration reforms include:

• Extending the updated returns window from two years to four years
• Filing of 9 million updated tax returns over the past two years, yielding an additional ₹8,500 crore in revenue
• Rationalizing TDS and TCS provisions to optimize thresholds and rates
• Decriminalizing certain tax provisions
• Introducing a simplified direct tax code, set to be unveiled next week

The push for transparency and ease in taxation could encourage more compliance and confidence in the system, further bolstering economic growth.

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Customs Duty Reform: Boosting Competitiveness

Global competitiveness is a major concern for Indian businesses, and this budget takes steps to address it by rationalizing customs duties.

CBIC Chairman Sanjay Kumar Agarwal announced that customs duties across 8,500 tariff lines have been revised, bringing the average customs duty rate down from 11.65% to 10.66%, aligning closer to ASEAN standards.

Key highlights of the reform include:

• Eliminating seven duty rate slabs
• Removing surcharges on 82 tariff lines
• Reducing duties on critical minerals needed for semiconductors and clean energy
• Cutting customs duty on frozen fish paste from 30% to 5% to boost marine exports
• Granting new duty exemptions for mobile manufacturing components

These changes aim to streamline trade policies, reduce costs for businesses, and encourage both domestic manufacturing and exports.

Industry’s Verdict: A Growth-Oriented Budget?

Industry leaders have largely welcomed the budget, praising its focus on fiscal prudence, capital expenditure, and structural reforms.

FICCI President Harsha Vardhan Agarwal called it "a blueprint for resilience, innovation, and long-term economic transformation."

One of the most applauded aspects was tax relief for individuals earning up to ₹12.75 lakh per annum, which is expected to enhance disposable income and boost consumption.

Additionally, several FICCI recommendations made their way into the budget, such as:

• Efforts to improve agricultural productivity in 100 low-yield districts
• A new pulses mission to boost domestic production and reduce dependence on imports

With a strong push for infrastructure, digital economy, and green growth, the budget has been positioned as a roadmap for sustainable economic expansion.

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The Road Ahead: Growth with Stability?

The Union Budget 2025-26 sets the stage for India’s economic future with a focus on capital investment, fiscal prudence, and tax simplifications. The challenge, however, lies in execution—ensuring that allocated funds translate into real-world impact.

By prioritizing non-inflationary growth, the government is aiming for long-term economic stability rather than short-term stimulus-driven expansion. As businesses, taxpayers, and policymakers digest the budget’s implications, the real test will be in its implementation.

For now, the government’s message is clear: India is building for the future—sustainably, responsibly, and strategically.

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