Union Budget 2025 Impact - Key Sector Analysis By Nirmal Bang

Central government capex growth has moderated to 7% in FY25 and 10% in FY26. Notably, capex is now dependent on states and the defence sector with major ministries like roads and railways seeing virtually no increase in allocation in FY26.

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Nirmal Bang Report

The focus of the budget for FY26 remained on fiscal consolidation with the fiscal deficit pegged at 4.8% of gross domestic product (estimate: 4.9%) in FY25 and 4.4% of GDP (estimate: 4.5%) in FY26.

The increase in the income tax exemption limit to Rs 1.2 million from Rs 0.7 million earlier along with tweaks in the tax slabs could boost private final consumption expenditure by at least 0.5% and GDP by ~0.3%.

While this is definitely a positive for discretionary consumption, we remain skeptical on the ability to boost wage growth at the very bottom of the pyramid. Moreover, allocation under major schemes are largely flat.

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