Media

On February 1, 2025, India’s Minister of Finance Nirmala Sitharaman delivered the Union Budget Presentation. This year’s Budget comes as the Narendra Modi government contends with narrower economic growth projections driven by fluctuating global economic conditions, with Minister Sitharaman estimating India’s GDP growth at 6.3-6.8 percent for FY 2025-2026. Accordingly, the Budget showcases the Indian government’s efforts to drive consumption-led and inclusive growth, with a particular focus on four key engines: agriculture, Micro, Small, and Medium Enterprises (MSME), investment, and exports.

Top-Line Takeaways

Budget’s Announcements Showcases a Confident Government: The Budget’s ambitious reforms underscore the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government’s steady commitment to economic growth. This is evidenced by the strong focus on infrastructure spending, manufacturing, and investor-friendly reforms. The recent state election victories in Maharashtra and Jharkhand also indicate public confidence in the government’s economic and political agenda, signaling continued support for its policies.

Focus on Domestic Politics and Responsiveness to Coalition Dynamics: The Budget’s inclusion of a range of state-level initiatives, especially for the state of Bihar, demonstrates the NDA government’s coalition dynamics and its desire to sustain popularity in high-priority states. Minister Sitharaman announced an array of projects for Bihar, including capacity enhancement at IIT-Patna, the establishment of greenfield and brownfield airports, and the creation of a food technology institute. This assumes significance as Bihar is set to hold elections in November 2025 and as the state’s Chief Minister Nitish Kumar’s Janata Dal party continues to play a crucial role as a BJP ally.

Signals to the Trump Administration: Several announcements in this year’s Budget indicate the Indian government’s strategic response to the Trump administration’s priorities on trade and New Delhi’s intent to manage potential U.S. tariff pressures. The government’s decision to reduce or eliminate customs duties on motorcycles and marine products, for example, is aligned with U.S. trade interests. Furthermore, the government’s intent to reform India’s nuclear liability laws demonstrates a push to operationalize the U.S.-India Civil Nuclear Agreement 2005, which shortly follows the United States’ announcement to remove export controls on Indian nuclear entities. This effort also aligns with the Indian government’s intent to enable private sector participation in the nuclear power sector, with an aim to establish five small modular reactors (SMR) by 2033 and produce at least 100 gigawatts of nuclear power by 2047.