Budget 2025: New Funding Models and Sectoral Boost Expected
The Union government is expected to announce some innovative measures in Budget 2025 to build infrastructure, promote agriculture, boost MSMEs, and some other critical sectors, according to a report from the State Bank of India. It may include alternative funding mechanisms, targeted production-linked incentive (PLI) schemes, and enhancing India's green economy and its disaster management framework.
The report points out the possible introduction of alternative financing for infrastructure projects, including tax-free and tax-paid bonds, which will reduce borrowing costs for high-rated entities and speed up development.
In agriculture, SBI suggests establishing a Credit Guarantee Fund Trust for Agri and Allied Sectors (CGFTAAS) to ensure fresh agricultural loans, including Agri Value Chain Financing (AVCF). This could act as a credit accelerator, improving sectoral efficiency and addressing gaps highlighted in a 2021 agricultural value chain report.
The housing sector may see changes in the definitions of Priority Sector Lending, with affordable housing limits raised to Rs 65 lakh in metro cities and Rs 50 lakh in other regions, replacing criteria set in 2018.
For MSMEs, SBI suggests PLIs for sectors such as textiles, food processing, electronics, and auto components. Increased allocation to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and incentives for expanded loan coverage can provide further support.
Sustainability focus is expected, with a green taxonomy to direct funds towards climate commitments under India's Nationally Determined Contributions (NDC) to the UNFCCC.
The report further suggests the formation of a Disaster Pool to avoid financial losses caused by natural calamities. As in the case of the Nuclear and Terrorism Pools, this public-private insurance program would further improve disaster resilience.
The education sector is likely to be reformed, too, with collaboration between global institutions and overseas centers for Indian institutes, attracting international students and boosting India's knowledge-driven economy.
As the SBI mentioned, these steps are expected to boost economic growth, resilience, and sustainability across critical sectors that reflect the holistic development focus in Budget 2025.
