The policy environment of India has seen much change in recent years, with the aim of strengthening economic growth, social welfare, and sustainable development. The Union Budget 2025-26, tabled by Finance Minister Nirmala Sitharaman, reflects these initiatives, with the theme of holistic growth as “Sabka Vikas” (Collective Prosperity).
Agriculture: Increasing Productivity and Sustainability
Identifying agriculture as the backbone of the economy, the government launched the Prime Minister Dhan-Dhaanya Krishi Yojana, with a focus on agri-district development to enhance rural wealth. Programs such as the National Mission on High Yielding Seeds and a Five-Year Mission for Cotton Productivity are dedicated to raising crop production and the income of farmers. Even the creation of a Makhana Board in Bihar indicates the emphasis on state-specific agricultural produce. To financially aid farmers, loan ceilings under the Kisan Credit Card scheme have been increased to ₹5 lakh from ₹3 lakh.
Micro, Small, and Medium Enterprises (MSMEs): Drivers of Economic Growth
MSMEs, which significantly contribute to employment and exports, have been targeted as central to economic growth. The government has updated the classification criteria for MSMEs with increased investment and turnover limits of 2.5 and 2 times, respectively, in order to facilitate growth. Programs like Credit Cards for Micro Enterprises and a Fund of Funds for Startups are meant to enhance credit availability and promote entrepreneurship. Industry-specific schemes, such as for the footwear, leather, toy, and food processing sectors, are meant to enhance manufacturing and support the “Make in India” initiative.
Investment: Developing Infrastructure and Supporting Innovation
The government has allocated a capital outlay of ₹11.21 lakh crore (3.1% of GDP) for FY2025-26 to spur infrastructure growth. The investment is to be made in areas like renewable energy, electric vehicle charging infrastructure, waste management, urban and social infrastructure, digital infrastructure, and manufacturing processes for these industries. These are aligned with the vision of developing India as a developed nation by 2047.
Fiscal Policy: Navigating Fiscal Prudence
The government in the Union Budget 2025-26 had targetted a fiscal deficit of 4.4% of GDP, a reduction from last year’s 4.8%. This is a reflection of fiscal prudence with an element of accommodation of higher capital expenditure. Gross market borrowings are estimated at ₹14.82 lakh crore and net tax receipts at ₹28.37 lakh crore. The government also intends to bring down the debt-to-GDP ratio to 50% by March 31, 2031, from the present 57.1%, as per international fiscal standards.
Industrial Policy: Revitalizing Manufacturing
In order to spur manufacturing, the government introduced Production-Linked Incentives (PLIs), tariffs, and domestic content requirements. Under the PLI scheme launched in March 2020, incentive is provided in financial terms for manufacturers based on tangible results such as sales of domestically produced items. The government seeks to achieve greater domestic production in emerging and strategic industries, lower import dependency, increase cost competitiveness, and strengthen export strength through this measure. Both indigenous companies and foreign firms with Indian subsidiaries are being provided with such incentives.
Energy and Sustainability: Balancing Growth with Environmental Responsibility
India’s energy policy is centered on security, affordability, and sustainability. Partnerships, including the U.S.-India Energy Security Partnership, aim at securing stable energy markets and increasing hydrocarbon production to ensure affordable access to energy. The government also aims at increasing strategic petroleum reserves to ensure economic stability in times of crisis. Furthermore, efforts to enhance energy trade, especially crude oil, petroleum products, and liquefied natural gas, are being pursued to address the increasing needs of the economy.
Labor and Employment: Generating Employment and Increasing Skills
To improve low labor force participation, the government is encouraging private investment in employment-intensive industries such as agro-processing, manufacturing, hospitality, transport, and the care economy. Measures include labor-intensive industry-specific support, increasing the number of skilled workers, enhancing access to finance, and promoting an innovation-led economy. These efforts are meant to generate more and quality jobs, enabling economic growth and raising exports.
Financial Sector: Building Stability and Liquidity
The Reserve Bank of India (RBI) has indicated that it will continue to keep the banking system in a liquidity surplus by buying bonds and currency swaps. The objective is to allow interest rate cuts to be passed on to consumers and enhance the effectiveness of monetary policy. The RBI intends to purchase bonds for ₹1 trillion and undertake three-year currency swaps of $10 billion to offset recent liquidity drains, thus bolstering economic growth.
Conclusion
India’s new national policies are an overarching approach towards promoting economic progress, social well-being, and ecological balance. Through policy interventions in critical areas like agriculture, MSMEs, investment, fiscal policy, industrial growth, energy, labor, and finance, the government hopes to create a robust and inclusive economy. These policies are purposely coordinated to drive India towards becoming a developed country by the year 2047, with the growth benefits being shared equally across its people.
