India’s Union Budget 2025-26 focuses on fostering inclusive growth, improving fiscal stability, and enhancing the nation’s global economic standing. Finance Minister Nirmala Sitharaman unveiled key measures targeting capital investments, foreign direct investment (FDI) growth, and export performance.
The budget aligns with India’s ambition to become a global leader in economic resilience while addressing both domestic challenges and global financial risks.
Economic Growth Projections
India’s real GDP is projected to grow by 6.4%, with nominal GDP expected to rise by 10.1% in FY 2025-26, according to data from the National Statistics Office (NSO). Inflation pressures have eased, with retail inflation averaging 4.9% between April and December 2024, compared to 5.4% in the previous fiscal year.
The Reserve Bank of India (RBI) has projected inflation rates of 4.6% and 4.0% in Q1 and Q2 of FY 2025-26, respectively. These trends reflect the impact of supply-side interventions aimed at stabilizing food prices and maintaining macroeconomic balance.
Capital Expenditure and Fiscal Deficit
The budget has earmarked ₹11.21 lakh crore for capital expenditure, representing 3.1% of GDP. This allocation includes ₹1.50 lakh crore for interest-free loans to support state-led infrastructure projects. Investments will focus on sectors such as transport, energy, and technology to drive long-term productivity.
India’s fiscal deficit for FY 2024-25 is revised to 4.8% of GDP, with plans to reduce it below 4.5% by FY 2026-27. To finance the deficit, net market borrowings are estimated at ₹11.54 lakh crore, with gross borrowings projected to reach ₹14.82 lakh crore.
FDI Revival and External Sector Performance
India experienced a revival in foreign direct investment (FDI) inflows, with gross FDI rising to $48.6 billion between April and October 2024. This marked an increase from $42.1 billion in the same period the previous year. Net FDI inflows stood at $14.5 billion, reflecting growing investor confidence in India’s economic policies.
On the export front, merchandise exports grew by 1.6%, while services exports saw a robust 11.6% increase during FY 2024-25. The current account deficit (CAD) moderated to 1.2% of GDP in Q2, supported by foreign exchange reserves of $640.3 billion, which provide 11 months of import cover.
Strategic Priorities for FY 2025-26
The budget identifies key areas for investment and reform to sustain long-term growth and stability:
- Public Capital Investment: Strengthening infrastructure to boost productivity and job creation.
- Technological Development: Investing in R&D for critical technologies such as artificial intelligence, green innovation, and advanced manufacturing.
- Social Welfare Programs: Expanding access to education, healthcare, and social security to promote equitable growth.
- Fiscal Responsibility: Continuing efforts to reduce the fiscal deficit and maintain debt sustainability through transparent policy measures.
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Strengthening India’s Global Position
The budget reaffirms India’s role as a key player in shaping an inclusive and sustainable global economic order. As global commodity and geopolitical risks persist, the government aims to build economic resilience by enhancing self-reliance, export competitiveness, and technological leadership.
With these strategic measures, Budget 2025 sets the foundation for sustained growth, reinforcing India’s economic aspirations on both domestic and international fronts.
