Feb 02, 2025 09:22 PM IST
The budget for the coming fiscal has capitalised on prudent fiscal management and strengthens the four key pillars of India’s economic resilience
There were heightened expectations from Union Budget 2025-26 regarding building on the momentum of last year’s nine budget priorities — and it has delivered. With India marching towards realising the Viksit Bharat vision, this budget takes decisive steps for high-impact growth. The Economic Survey’s estimate of 6.4% real GDP growth and retail inflation softening from 5.4% in FY24 to 4.9% in FY25 reinforces India’s position as the world’s fastest-growing major economy. The budget for the coming fiscal has capitalised on prudent fiscal management and strengthens the four key pillars of India’s economic resilience — jobs, energy security, manufacturing, and innovation.
India needs to create 7.85 million non-agricultural jobs annually until 2030 — and this budget steps up. It has enhanced workforce capabilities through the launch of five National Centres of Excellence for Skilling and aims to align training with “Make for India, Make for the World” manufacturing needs. Additionally, an expansion of capacity in the IITs will accommodate 6,500 more students, ensuring a steady pipeline of technical talent. It also recognises the role of micro and small enterprises (MSMEs) in generating employment. The enhancement of credit guarantees for micro and small enterprises from ₹5 crore to ₹10 crore, unlocks an additional ₹1.5 lakh crore in loans over five years. This, coupled with customised credit cards for micro enterprises with a ₹5 lakh limit, will improve capital access for small businesses. While these measures are commendable, the scaling of industry-academia collaboration as well as fast-tracking vocational training will be key to ensuring sustained job creation.
India remains highly dependent on Chinese imports for solar modules, electric vehicle (EV) batteries, and key electronic components, exposing the sector to geopolitical risks and trade barriers. This budget takes this challenge head-on. It allocates ₹81,174 crore to the energy sector, a significant increase from the ₹63,403 crore in the current fiscal, signalling a major push toward strengthening supply chains and reducing import dependence . The exemptions for 35 additional capital goods required for EV battery manufacturing adds to this. The reduction of import duty on solar cells from 25% to 20% and solar modules from 40% to 20% eases costs for developers while India scales up domestic production capacity. The allocation to the ministry of new and renewable energy (MNRE) has increased 53% to ₹26,549 crore, with the PM Surya Ghar Muft Bijli Yojana seeing an 80% jump to ₹20,000 crore . These measures provide the decisive push, but to truly achieve our climate goals, we must also accelerate investments in battery recycling, critical mineral extraction, and strategic supply chain integration.
With capital expenditure estimated at 4.3% of GDP, the highest it has been for the past 10 years, this budget lays the foundation for India’s manufacturing resurgence. Initiatives such as the National Manufacturing Mission will provide enabling policy support for small, medium, and large industries and will further solidify the Make-in-India vision by strengthening domestic value chains. Infrastructure remains a bottleneck for manufacturers. The budget addresses this with massive investments in logistics to reduce supply chain costs, which currently stand at 13-14% of GDP, significantly higher than that of most of the developed nations (~8%). A cornerstone of the Mission is clean tech manufacturing. There are promising measures throughout the value chain. The budget introduces customs duty exemptions on lithium-ion battery scrap, cobalt, and 12 other critical minerals, securing the supply of essential materials and strengthening India’s position in global clean-tech value chains.
Despite India’s thriving tech ecosystem, research and development (R&D) investments remain below 1% of GDP, compared to 2.4% in China and 3.5% in the US. Future jobs will require Industry 4.0 capabilities, and India must prepare now. This budget tackles the gap. A good start is the government allocating ₹20,000 crore to a private-sector-driven Research, Development, and Innovation (RDI) initiative. The budget recognises the transformative potential of artificial intelligence (AI) by introducing the PM Research Fellowship, which will provide 10,000 fellowships for technological research in IITs and IISc with enhanced financial support . This, along with a Centre of Excellence for AI and 50,000 Atal Tinkering Labs in government schools, are optimistic steps toward a knowledge-driven economy.
Sumant Sinha is founder, chairman, and CEO, ReNew. The views expressed are personal
