The Union Budget 2025 - A missed opportunity in shaping India's economic future - A Comprehensive Critique

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has been touted as a middle-class-friendly, growth-oriented budget. However, a deeper analysis reveals several shortcomings and missed opportunities that could have positioned India on a more sustainable economic trajectory. Below is a comprehensive critique of its major components.

1. Individual Taxpayers: Discontent Over Superficial Relief

a. Increased Exemption Limit – A Mere Gimmick?

The increase in the income tax exemption limit to ?1.2 million may seem beneficial at first glance. However, this does not address the real burden of rising inflation and cost of living.

Many middle-income taxpayers feel the relief is marginal, given that indirect taxes (GST, fuel taxes) continue to eat into their earnings.

The government should have considered indexing tax slabs to inflation rather than offering arbitrary revisions.

b. New Tax Regime vs. Old Tax Regime: A Confusing Dilemma

The government’s push towards the new tax regime (with lower rates but no exemptions) has confused many taxpayers.

Those who have structured their finances around deductions like 80C (investments), 80D (health insurance), and HRA (house rent allowance) find the new regime unattractive.

The government has not provided enough clarity on whether the old tax regime will be phased out, leaving taxpayers uncertain about long-term financial planning.

c. No Relief in GST Rates on Essentials

While the budget focuses on direct taxes, it fails to address the high GST rates on essential goods and services.

Healthcare, education, and household essentials remain taxed heavily, negating any supposed relief offered through direct tax reductions.

d. Lack of Relief for Senior Citizens

No increase in tax exemptions for senior citizens, despite rising medical expenses and a lack of social security in India.

Many expected higher interest income exemptions for retirees, but the budget did not deliver on this.

2. Capital Expenditure: Quantity Over Quality

Inefficiency in Infrastructure Spending

While capital expenditure has increased by 10.1%, the issue lies in the efficiency of spending rather than just the amount allocated.

India’s infrastructure projects are often plagued by delays, cost overruns, and bureaucratic red tape, leading to poor capital efficiency.

Overemphasis on Roads and Railways: While these sectors are important, the neglect of urban transport solutions like metro expansion and electric mobility initiatives is evident.

Neglect of Human Capital Investment

Underwhelming Budget for Education & Health: The budget’s allocations for education and healthcare remain inadequate, given the massive gaps in these sectors.

The National Health Mission funding saw only a marginal increase, despite the lessons learned from the COVID-19 pandemic.

Higher Education Allocation Stagnant: India needs significant investment in higher education and research to compete globally, yet the budget lacks any vision for higher education transformation.

3. Agriculture and Rural Development: A Band-Aid Approach

Superficial Support Without Structural Reforms

The introduction of the PM Dhan-Dhaanya Krishi Yojana is another short-term fix rather than a long-term solution.

MSP Uncertainty: The government has once again failed to provide legal backing to Minimum Support Prices (MSP), a long-standing demand of farmers.

Credit Schemes with No Market Reforms: While expanding the Kisan Credit Card scheme is a positive step, it does little to solve structural issues such as supply chain inefficiencies and lack of cold storage facilities.

Ignoring Rural Employment Generation

MGNREGA funding has not seen a substantial increase, despite growing rural distress.

The agriculture sector remains under mechanized, and the budget provides no clear roadmap for technological integration to improve productivity.

4. Defence Budget: Imbalanced Priorities

Excessive Allocation to Personnel Costs

The defence budget sees an increase to ?6.81 trillion, yet a disproportionate share is allocated to salaries and pensions rather than modernization.

India faces security challenges from China and Pakistan, but the budget does little to enhance military technology, cyber warfare capabilities, or indigenous weapons production.

Lack of Research and Development in Defence

India’s dependence on foreign arms imports continues, with no clear strategy for indigenization under the Atmanirbhar Bharat initiative.

Research and development (R&D) in defence remains underfunded, limiting long-term self-reliance.

5. Fiscal Deficit: The Balancing Act That Fails to Impress

Questionable Fiscal Discipline

The budget projects a fiscal deficit of 4.4%, a reduction from 4.8%. However, this is based on optimistic revenue projections and a lack of concrete expenditure control measures.

Revenue Projections Overestimated: The government assumes a strong increase in GST and corporate tax collections, but this is uncertain given the global slowdown and domestic demand fluctuations.

Lack of Subsidy Rationalization: Fuel and fertilizer subsidies continue to be a major expenditure, with no clear roadmap for rationalization.

Divergence from Long-Term Economic Strategy

India is aiming for a $5 trillion economy, yet the budget lacks structural reforms in labour laws, land acquisition policies, and business regulations needed to attract long-term investments.

Privatization Drive Slows Down: The disinvestment target is modest, indicating a lack of commitment to reducing government ownership in non-strategic sectors.

6. Social Sector and Welfare: Populism Without Substance

Missed Opportunities in Social Welfare

The budget lacks any path-breaking social security measures, particularly for gig workers and informal sector employees.

No Universal Basic Income or Direct Cash Transfer Expansion: Given rising inflation and income inequality, a well-structured direct cash transfer program could have had a more profound impact on poverty alleviation.

Lack of Focus on Women and Youth Employment

Women’s employment programs remain underfunded, despite the government’s claims of prioritizing gender equality.

No Major Youth Skill Development Initiative: The Skill India initiative has been stagnating, and the budget offers no fresh momentum to vocational training.

Conclusion: A Budget of Missed Opportunities

While the Union Budget 2025 attempts to provide short-term tax relief and boost capital expenditure, it fails to address long-term structural economic challenges such as:

Weak revenue generation strategies and over-reliance on indirect taxes.

Neglect of MSMEs, startups, and job-creating sectors.

Lack of transformative reforms in agriculture, education, and healthcare.

Misallocation of defence spending, focusing more on salaries than modernization.

Populist measures that may not translate into sustainable economic growth.

The government had an opportunity to introduce bold economic reforms, modernize public spending, and structurally strengthen key sectors, but instead, it has chosen short-term political gains over long-term economic sustainability.

In total, the Union Budget 2025 prioritizes optics over deep-rooted reforms, making it a missed opportunity in shaping India's economic future.