Indian Prime Minister Narendra Modi’s government presented its annual budget to Parliament on Saturday, aiming to attract the salaried middle class with tax reductions and drive economic growth by supporting agriculture and manufacturing sectors.
In her budget speech, Finance Minister Nirmala Sitharaman emphasized the government’s goal of increasing private investment to fuel growth, raising funds for the agriculture sector, and improving the financial well-being of India’s middle class.
“The budget’s focus is on inclusive growth, bringing everyone along,” Sitharaman said, adding that the government is targeting a fiscal deficit of 4.4% of India’s GDP for the 2025-26 financial year.
India, the world’s fifth-largest economy, is expected to experience its slowest growth in four years due to challenges such as a sluggish manufacturing sector, ongoing food inflation, stagnant job growth, and weak urban consumption. The country’s chief economic advisor forecasted that India’s economy would grow between 6.3% and 6.8% in the upcoming fiscal year.
Here are some takeaways from the budget:
Income tax cuts for the salaried middle class
Finance Minister Nirmala Sitharaman announced that the Indian government will implement reforms in various sectors, including finance, power, urban development, and mining, along with significant changes in taxation. She raised the income tax threshold from $8,074 to $14,800 and revealed that a new income tax bill will be introduced next week.
“The new tax structure will significantly reduce taxes for the middle class, allowing them to retain more money, which will increase household consumption, savings, and investment,” Sitharaman explained.
Prime Minister Modi, now in his third term, has been facing pressure to address dissatisfaction among the middle class and create more jobs to support sustained economic growth. Economists have urged the government to reduce income taxes and introduce job creation programs to combat the rising unemployment rate.
Data from the Center for Monitoring the Indian Economy showed that youth unemployment stood at 7.5% in January, highlighting the challenge of providing jobs in a country with a population of over 1.4 billion.
Agriculture sector and gig economy gets a boost
To enhance productivity in the agriculture sector, the Indian government will launch a nationwide program aimed at promoting high-yielding crops, with a particular focus on pulses and cotton production. Finance Minister Nirmala Sitharaman stated that the program will involve at least 17 million farmers and will increase the limit for subsidized credit available to them from $3,460 to $5,767.
The government also plans to officially register gig workers in India and improve their access to healthcare. Sitharaman announced that the government will provide identity cards to gig workers and create a national registry to ensure they are included in welfare programs.
According to estimates from the government think tank NITI Aayog, India’s gig economy could employ more than 23 million people by 2030.
Investments in new startup funds and energy sector
Finance Minister Nirmala Sitharaman introduced a new fund for startups and announced that the government will allocate more resources to encourage innovation in collaboration with the private sector. She also highlighted plans to promote manufacturing and exports, aiming to increase the manufacturing sector’s contribution to India’s economy, which currently stands at around 17%, below the target of 25%.
The government plans to invest more in tourism-driven job creation across various Indian states, as well as in infrastructure development. This includes boosting air connectivity by adding 120 new destinations over the next decade.
Sitharaman also unveiled the Nuclear Energy Mission, which aims to support India’s transition to clean energy by developing at least 100 GW of nuclear power by 2047.