Taking a cue from the Economic Survey 2024-25 that urged the government to ramp up domestic growth engines, the Union Budget 2025-26 has taken up the theme of manufacturing, investments and consumption as it looks to give the economy a boost, since it is seen to expand by 6.3–6.8% in FY26.
Presenting the Union Budget 2025-26 on Saturday in the Lok Sabha, Union Finance Minister Nirmala Sitharaman underlined agriculture, MSME, investment and exports as the four powerful engines of growth and development.
Key announcements in the Union Budget seem to be aimed at boosting the consumption and purchasing power of the middle class through income tax rate cuts as well as boosting India’s manufacturing capabilities under the Make in India scheme and supporting micro, small and medium enterprises.
The move is significant given the policies being announced by US President Donald Trump that are aimed at making the US a manufacturing hub again.
To support domestic industry, key Budget announcements include revision in the classification criteria of MSMEs and enhancement in the investment and turnover limits for classification of all MSMEs to 2.5 and 2 times. respectively. This would help them achieve higher efficiencies of scale, technological upgradation and better access to capital.
Similarly, the FM has also announced measures for the toy sector, leather and footwear sector and a National Manufacturing Mission covering SMEs for furthering Make in India. Customs duty rejigs and duty changes to support domestic manufacturing and exports have also been announced.
Abhishek Jain, Indirect Tax Head & Partner, KPMG noted that the 2025 budget maintained its emphasis on the “Make in India, Make for the World” initiative. “Various schemes aimed at enhancing infrastructure and business friendly policies are expected to strengthen India’s position as a global hub for industries such as toys and leather. Measures to support shipbuilding, including financial assistance and duty rationalisation, will further drive growth in this sector,” he said. Additionally, adjustments to customs duties, particularly in emerging and sustainable industries like electric vehicles and electronics, are set to foster expansion and development in these areas.”
Vivek Jalan, Partner Tax Connect Advisory Services agreed and noted that the Union Budget is for Manufacturing, Middle Class and MSMEs. “As expected, income tax TDS/ TCS provisions have been revamped and rationalised. Customs duty on capital goods and raw material imports have been rationalised to promote manufacturing, especially on Lithium Ion batteries. MSMEs have also been a special focus in this budget. The Biggest big bang change of course is the exemption of Income Tax for middle class with income up to Rs 12 lakh,” he said.
