Union Budget 2025: Will It Set the Stage for India's Next Economic Leap?

The Union Budget 2025 will be announced by Finance Minister Nirmala Sitharaman tomorrow, on February 1, at 11 am. It will be her eighth successive budget and the second full budget under the Modi 3.0 government. While the timing of the presentation remains consistent with the tradition of February 1 at 11 am, the government has occasionally adjusted the date when it coincides with weekends or public holidays. The stock market will be open during the presentation so that the investors can react in real-time, and Saturday timing gives an opportunity to the government to have instant feedback from stakeholders. It allows the government enough time to absorb the announcement in the markets.

Presenting budget on Saturdays has gone well with the tradition initiated way back in 1997 when Finance Minister P. Chidambaram advanced the time of presentation of budget to 11 am for better market engagement. In 2017, Finance Minister Arun Jaitley took it forward by advancing the presentation date to February 1, coinciding with the start of the financial year and avoiding seasonal election-related interference.

Market Reaction and Economic Landscape

All eyes are now on tomorrow because the stock exchanges have declared open and the National Stock Exchange has announced a special trading session. The pre-open session is scheduled from 9:00 am and ends with 9:08, while the regular trading session is between 9:15 am to 3:30 pm. This follow-through from the past practices by February 1, 2020, and February 28, 2015, ensures that investors get to react in real-time to this budget day. Most importantly, of course, given market reaction to previous budget days, investors should be able to react in real-time; for example, Nifty on February 1, 2024, and July 23, 2024 closed slightly lower, reflecting the cautious sentiment that surrounds the budget announcements. The government is expected to have a few key priorities for the fiscal year, including enhancing the quality of spending, strengthening the social security net, and reducing the fiscal deficit to 4.5% of GDP.

She would most likely concentrate on infrastructure investment and social welfare schemes while still maintaining fiscal prudence. Because the markets have opened during budget, traders as well as investors are preparing themselves for another happening day, so they can clearly understand the budget roadmap of the government for the next year.

Economic Challenges: Foreign Reserves and Rupee Depreciation

This Union Budget 2025-26 will be important in dealing with the challenges brought about by low foreign exchange reserves, rupee depreciation, and global economic uncertainties. With the forex reserves dwindling to $634.59 billion and the rupee hitting 86 per dollar amid capital outflows and a widening trade deficit, the RBI has intervened actively to curtail volatility. But all these point toward signs of improvement, such as a revival of FPIs, which seems to be gaining investor confidence again. The budget will probably emphasize economic stabilization, foreign investment incentives, and policy measures to enhance resilience for sustainable growth in the face of headwinds in the global scenario.

Renewable Energy and Battery Storage Plans

The Modi government is all set to unveil an unprecedented battery storage plan in the Union Budget for the financial year 2025-26, with renewable energy taking center stage. Sources indicate that Finance Minister Nirmala Sitharaman will introduce significant investment support for companies in the renewable energy sector, particularly in battery storage initiatives. The plan aims to increase India's renewable energy storage capacity from 220 MW to over 220 GW within five years, ensuring better integration with the national grid.

Another significant development is the establishment of a whole renewable energy zone that shall promote solar, wind, and green hydrogen projects across different states and thus spur regional investment. The Budget also may provide some incentives to banks to increase the financial support of the sector so that India could achieve the goal of 500 GW of renewable energy by 2030. As India's renewable energy capacity is already growing by 15.84%, these efforts will further accelerate the transition to green energy.

Sectoral Expectations: Healthcare, Education, and Exports

Experts have asked the Union Budget 2025 to undertake transformational initiatives for India's healthcare and pharmaceutical industries toward making this sector a driving force in terms of innovation, manufacturing, and export competitiveness.

Munira Loliwala, VP of Strategy and Growth at TeamLease Digital, urged the government to increase the exemption of import duty on life-saving drugs and oncology treatments so that costs come down and accessibility improves. She also suggested that public health spending be increased to 2.5% of GDP by 2025 and that the rural healthcare infrastructure be improved.

Dinesh Gupta, Founder & CEO of Vikalp Online School, said that this budget will set the stage for transformative growth in education, so that students from all over the world can join Indian institutes for education. He added that India has already produced world-class talent, but there is a lack of institutions that can match the quality of global counterparts. Also, suggested that the digital revolution, which has wiped out geographical barriers, can be used to create hundreds of world-class digital schools and universities. He is still hopeful that the Budget will help his vision for shaping the future of learning in India.

The export sector is also closely watching the Budget as exporters highlight their wishlists. Ashwani Kumar, Head of the Federation of Indian Export Organisations (FIEO), believes that India could seize a significant opportunity to boost exports by $25 billion, particularly in sectors such as electronics, automobiles, chemicals, and textiles. This opportunity comes in the wake of escalating trade tensions, with China in the spotlight due to U.S. tariff threats. The government should think about a marketing scheme exclusively on export to the US, Kumar advised. Further, FIEO has asked the government to minimize dependence on foreign shipping lines by increasing further investments in India's own shipping infrastructures or through private sector shipping lines.

Insurance Sector Demands

Insurance experts are also calling for the Finance Minister Nirmala Sitharaman to give special priority to the life and health insurance sectors in the forthcoming Budget 2025. Suggestions include increasing the Section 80D deduction on health insurance premium, and exempting term insurance premium from taxes as a standalone tax benefit in order to further increase coverage and security for the citizens.

Life insurers also look for tax abolition on annuity or pension income!

Jude Gomes, MD and CEO of Ageas Federal Life Insurance argues that elimination of tax on annuity product will boost retirement planning. Further, increasing the Rs 50,000 tax exemption on NPS to pension plans offered by life insurers will help make retirement savings more attractive.

Then, What Does The Real Estate Sector Want?

Pavan Kumar, Founder & CEO of White Lotus Group said that the 2025 Union Budget presents an opportunity to further strengthen the real estate sector's contributions towards India's GDP by 2025.

 The sector is at a transformative phase, driven by technological advancements, consumer preferences for sustainable living, and government reforms.

"A focus on incentivising green housing and sustainable developments will encourage eco-conscious practices, ensuring India aligns with global sustainability benchmarks. Simplifying approval processes through single-window systems and facilitating access to affordable financing can enhance efficiency and enable the timely completion of projects. Revisiting GST rates on under-construction properties will drive demand, especially in high-end and luxury housing segments".

Looking ahead, the Union Budget 2025-26 is expected to balance economic stability, growth incentives, and fiscal discipline.  The budget is going to take key measures related to forex reserves, rupee depreciation, infrastructure investment, renewable energy, healthcare, real estate, business, education, exports, and a lot more sectors, which are going to help India navigate the global uncertainty of its economic journey. All eyes are now on Finance Minister Nirmala Sitharaman as she unveils the financial roadmap for the year ahead.