Union Budget 2025-26: A Vision for Growth

New Delhi, Feb 3 (NationPress) The Union Budget 2025–26 is positioned as a bold declaration of fiscal discipline and enduring structural reforms, with the government keeping the fiscal deficit at 4.4 percent for FY26 while fostering investment growth, as capital expenditure escalates by 10 percent to ₹11.2 lakh crore.

This careful calibration aims to uphold credibility in debt management without stifling growth, as indicated by a report from PL Capital released on Monday.

In addition to boosting Capex, significant increases in central initiatives, including the PM Awas scheme, rural drinking water projects, and solar rooftop initiatives, have been noted compared to FY25RE, the report highlights.

The commitment to enhancing domestic manufacturing remains strong, with elevated funding allocated for the Production-Linked Incentive (PLI) scheme, renewable energy projects, and the semiconductor sector.

Moreover, the budget extends relief to the middle-class by reducing tax rates within the new tax framework, hinting at an imminent direct tax code overhaul.

The sustained focus on Capex and increased financial resources for individuals are expected to stimulate domestic consumption.

A significant positive for financial markets is the lack of new taxes on equity markets, such as the Securities Transaction Tax (STT) or Long-Term Capital Gains Tax (LTCG), enhancing investor confidence, according to the report.

The budget encourages domestic manufacturing, energy transition, and urban development while ensuring revenue growth driven by compliance without imposing new tax burdens.

Anticipations of a broad economic recovery are likely to bolster markets and generate double-digit returns in CY25.

“We recommend investments in Consumer staples and Discretionary sectors, Travel and Tourism, EMS, Healthcare and Pharmaceuticals, Capital Goods, and select automobile stocks,” the report advises.

The report also notes that gross market borrowings of ₹14.82 lakh crore (exceeding the anticipated ₹14.5 lakh crore) along with ₹2.5 lakh crore in switches will exert short-term pressure on bond yields.

However, expectations of an imminent rate reduction, supportive open market operations (OMO), and forthcoming RBI policy clarity should stabilize yields between 6.7-6.75 percent, the report asserts.

With an allocation of ₹11.21 lakh crore (reflecting a 10 percent YoY increase), the budget continues its Capex-driven growth strategy.

The effective capital expenditure of ₹15.48 lakh crore guarantees multiplier impacts, particularly in infrastructure, nuclear power logistics, and energy transition.

The shift towards executing projects through public-private partnerships indicates a strategy to attract private investment rather than relying solely on governmental funding, as observed in the report.

The restructured personal income tax framework, which elevates the nil tax threshold to ₹12 lakh and rationalizes tax brackets, boosts disposable incomes and rejuvenates urban consumption.

Efforts to maintain rural demand are directed through heightened Kisan Credit Card limits, direct agricultural support, and rural infrastructure investments, the report notes.

By enhancing the ease of doing business through tax certainty (new income tax code, safe harbor rules), revamping corporate merger and acquisition frameworks, and liberalizing foreign direct investment in insurance (100 percent), the budget outlines a pathway for a private sector-led revival in Capex.

The monetization of core assets through the National Monetisation Pipeline (NMP 2.0) reinforces this transition, the report adds.