Union Budget 2025 - Detailed Analysis & UPSC Relevance

 

1. Key Highlights of the Budget 2025

A. Structural Reforms & Industrial Growth

  • Customs Duty Rationalization:
    • Reduction of seven tariff rates to simplify taxation and encourage domestic manufacturing.
    • Exemption of Basic Customs Duty (BCD) on cobalt powder, lithium-ion battery waste, lead, and zinc to support clean energy and MSME sector growth.
    • Increase in BCD on interactive flat panel displays (IFPD) from 10% to 20% to correct inverted duty structures.
  • Ease of Doing Business:
    • Importers/exporters are allowed to voluntarily declare material facts and pay duty without penalties, provided no investigation has been initiated.
    • The time limit for the end-use of imported inputs was extended from six months to one year, easing compliance for businesses.

📝 UPSC Relevance (GS-3: Economy, Industrial Growth, Infrastructure Development)

  • Concepts to understand: Tariff barriers, Duty Inversion, Fiscal Incentives, and Make in India

B. Agriculture & Rural Economy

  • Reduction in Allocation for Key Agriculture Schemes:
    • PM Fasal Bima Yojana (Crop Insurance Scheme) reduced by ₹3,621.73 crore from last year.
    • Fertilizer subsidy cut by ₹26,500 crore, raising concerns over affordability for farmers.
    • Loan limit under Kisan Credit Card (KCC) enhanced from ₹3 lakh to ₹5 lakh.
  • Boost for Pulses and Fisheries:
    • Aatmanirbharta in Pulses: Six-year mission focusing on Tur, Urad, and Masoor pulses to reduce dependence on imports.
    • Fisheries Growth: Reduction in Basic Customs Duty (BCD) on frozen fish paste and fish hydrolysate to enhance seafood export competitiveness.

📝 UPSC Relevance (GS-3: Agriculture, Food Security, Rural Development)

  • Concepts to understand: MSP (Minimum Support Price), Loan Subsidies, Food Processing, and Agri-Exports

C. Infrastructure Development & Capital Expenditure

  • Record Capex Allocation: ₹11.2 lakh crore for infrastructure projects.
  • ₹1.5 lakh crore in 50-year interest-free loans to states for infrastructure expansion.
  • Nuclear Energy Mission: ₹20,000 crore investment for Small Modular Reactors (SMR) research.
  • Customs duty removal on battery manufacturing equipment to accelerate Electric Vehicle (EV) growth.

📝 UPSC Relevance (GS-3: Infrastructure, Renewable Energy, Sustainable Development Goals)

  • Concepts to understand: Capital Expenditure (CapEx), Public-Private Partnership (PPP), Clean Energy

D. Social Sector & Welfare Measures

  • Health Sector:
    • Budget allocation increased to ₹99,858.56 crore.
    • Exemption of 36 life-saving drugs from customs duty, reducing prices of cancer and rare disease treatments.
    • Ayushman Bharat expansion to include gig workers.
  • Education & Skill Development:
    • ₹500 crore for a Centre of Excellence in Artificial Intelligence for Education.
    • Expansion of IITs and medical seats (target: 75,000 new seats over five years).
    • Bharatiya Bhasha Pustak Scheme for digital textbooks in regional languages.

📝 UPSC Relevance (GS-2: Governance, Social Justice, Health & Education Reforms)

  • Concepts to understand: Health Infrastructure, National Education Policy (NEP), Skill Development

E. Financial Sector & Taxation

  • Income Tax Relief: Exemption limit raised from ₹7 lakh to ₹12 lakh, boosting middle-class disposable income​.
  • Insurance Sector: 100% Foreign Direct Investment (FDI) allowed, raising concerns over potential foreign dominance.
  • MSME Sector:
    • Loan guarantee limit raised from ₹5 crore to ₹10 crore, benefiting 1.5 lakh crore worth of credit over five years​.
    • National Manufacturing Mission to strengthen Make in India.

📝 UPSC Relevance (GS-3: Indian Economy, Financial Reforms, MSMEs & Startups)

  • Concepts to understand: Direct & Indirect Taxes, Fiscal Deficit, FDI, MSME Growth

2. Background Context & Significance

  • Economic Survey 2025 Highlights:

    • Identifies a 7.5% growth rate as essential for achieving Viksit Bharat 2047.
    • Advocates deregulation for MSMEs, focus on ease of doing business, and mental well-being of workers.

  • Fiscal Deficit & Government Borrowing:

    • Fiscal deficit reduced to 4.4% of GDP from 4.8% in FY26.
    • The government aims to preserve fiscal stability for a potential sovereign rating upgrade.

3. UPSC Mains Practice Questions

GS-2 (Governance & Social Justice)

  1. Discuss the impact of budgetary allocation on the education sector, with special reference to National Education Policy (NEP) 2020.
  2. Analyze the expansion of Ayushman Bharat and its impact on India's healthcare accessibility.

GS-3 (Economy & Infrastructure)

  1. How does rationalizing customs duties impact Make in India and domestic manufacturing? Discuss with examples.
  2. Evaluate the MSME loan guarantee expansion and its potential in promoting entrepreneurship and employment generation.

GS-4 (Ethics & Governance)

  1. How should governments balance economic growth and social welfare in budgetary planning?

4. Conclusion

  • Union Budget 2025 lays the foundation for Viksit Bharat 2047 but faces challenges like reduced rural welfare allocation and fiscal sustainability.
  • Key Takeaways for UPSC:
    • Structural reforms in customs duty & MSME policies.
    • Focus on clean energy, nuclear power & infrastructure.
    • Middle-class tax relief & increased disposable income.
    • Education & healthcare reforms for inclusive growth.

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