On February 1, 2025, Finance Minister Nirmala Sitharaman presented India's Union Budget, introducing significant measures aimed at stimulating economic growth, providing tax relief to the middle class, and bolstering various sectors.

Tax Reforms:

A major highlight of the budget is the substantial relief provided to individual taxpayers. The income tax exemption threshold has been raised from ?7 lakh to ?12 lakh, meaning individuals earning up to ?12 lakh annually are now exempt from paying income tax. This move is expected to increase disposable income, thereby boosting household consumption and savings.

Additionally, the budget proposes amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act to facilitate the development of nuclear energy. A Nuclear Energy Mission with an outlay of ?20,000 crore has been announced, aiming to develop Small Modular Reactors (SMRs), with five indigenously developed SMRs expected to be operational by 2033.

Agriculture and Rural Development:

The government has unveiled a six-year program to enhance the production of pulses and cotton, aiming to reduce dependence on imports. State agencies will procure pulses such as pigeon peas, black matpe, and red lentils at guaranteed prices to support farmers. In the cotton sector, the focus will be on research and development to boost production, particularly of extra-long staple cotton.

The budget also retains a significant allocation for the rural employment guarantee program (MGNREGA), with ?860 billion earmarked to provide minimum wage jobs for 100 days annually to rural households. This initiative aims to support the rural economy and address unemployment concerns.

Infrastructure and Industry:

To stimulate industrial growth, the government has proposed measures to improve the ease of doing business, including the establishment of a high-level committee for regulatory reforms and the creation of an investment friendliness index. These steps are designed to attract private investment and foster a more conducive business environment.

In the shipbuilding sector, the budget proposes revamping the Shipbuilding Financial Assistance Policy and including large ships above a specified size in the infrastructure harmonized master list. Additionally, a Maritime Development Fund is to be established to provide financial support to the sector.

Science and Innovation:

The budget allocates ?20,000 crore to implement a private sector-driven Research, Development, and Innovation initiative. Furthermore, the Prime Minister Research Fellowship will provide ten thousand fellowships for technological research in IITs and IISc, aiming to foster innovation and technological advancement.

Market Reactions:

The stock market's response to the budget was mixed. Consumer goods companies, such as Hindustan Unilever, Nestle, and Dabur, experienced gains, attributed to the increased disposable income resulting from tax cuts. Automakers like Bajaj Auto, Hero MotoCorp, and Maruti Suzuki also saw positive movements. Conversely, infrastructure firms faced declines due to perceived modest increases in capital spending. Insurance companies, including HDFC Life and SBI Life, experienced downturns as higher tax slabs reduced incentives for tax-saving products.

Fiscal Outlook:

The government aims to reduce the fiscal deficit to 4.4% of GDP, balancing the need for fiscal prudence with measures to stimulate growth. The budget reflects a commitment to supporting various sectors while maintaining fiscal discipline.

In summary, the Union Budget 2025 introduces comprehensive measures across taxation, agriculture, industry, and innovation, with a focus on stimulating economic growth, supporting the middle class, and fostering sustainable development.