Fallout Escalates

The Union Budget 2025-26 sets out to address a range of economic challenges, from reviving growth to bolstering social welfare.

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However, beneath the ambitious rhetoric lies a stark reality: allocations for crucial sectors do not align with the pressing needs of the economy.

While the government has taken steps to provide relief to the middle class through income tax cuts, the broader macroeconomic approach remains tilted towards supply-side interventions. Economic slowdown, rising unemployment, and persistent inflation are interlinked problems that demand targeted interventions.

The budget speech emphasised inclusive growth, investment in key sectors, and support for agriculture and MSMEs, yet the actual allocations tell a different story. Sectors like rural employment, education, health, and urban development, which directly impact demand generation, have seen either negligible increases or real-term cuts. This raises concerns about whether the budget will truly spur economic revival.

One of the key takeaways is the government's continued reliance on supply-side measures. Concessions to big businesses and corporate tax incentives in the past few years have neither spurred private investment nor addressed weak domestic consumption.

The government expects that boosting the private sector will lead to job creation and growth. However, if purchasing power among the majority of the population remains stagnant, demand will not rise sufficiently to justify large-scale private investment. This is where the budget appears to falter – it lacks substantial measures to put more money directly into the hands of lower-income groups, especially those whose incomes are too low to be in the tax net.

The budget also reflects a shift in fiscal priorities. While the finance minister announced a commitment to "Viksit Bharat" and transformative reforms, some of the biggest schemes for employment generation and welfare have seen declining allocations.