Union Budget 2025-26 : Who Really Benefits and Who Loses Out?
“Union Budget 2025-26: Impact on Middle Class, Tax Relief, and Political Strategy”
In Tamil, there’s a proverb: “When hunger strikes, ten qualities fly away.” These qualities include honour, lineage, education, generosity, knowledge, charity, penance, effort, perseverance, and desire. In modern times, especially during elections, even more virtues seem to vanish. The recently presented Union Budget 2025-26, ahead of the Delhi elections and with Bihar’s elections on the horizon, exemplifies this trend. The esteemed Finance Minister appears to have crafted a budget that generously favours a specific segment, aiming to secure their votes. India’s Budget and Its Impact on Middle Class
Union Budget 2025-26: Income Tax Reliefs and Political Strategy
The Finance Minister allocated ₹1 lakh crore for distribution, directing these funds towards 3.2 crore income taxpayers in a nation of 143 crore people. This group encompasses the middle class, the affluent, and the ultra-rich. In doing so, principles like equality, social justice, and fair distribution seem to have been overlooked.
The budget’s intent appears politically motivated. Facing declining revenues, the Finance Ministry projected a ₹60,000 crore deficit for 2024-25. To marginally improve the fiscal deficit, an additional ₹43,000 crore needed to be raised, totaling approximately ₹1 lakh crore. With Delhi elections imminent and promises of freebies in 2025-26, the pressure was palpable.
A significant decision was the enhancement of income tax exemptions. Individuals earning up to ₹12 lakh annually are now exempt from paying income tax under the revised tax regime. This move is expected to benefit over one crore taxpayers, effectively reducing Treasury revenues by approximately ₹1 lakh crore annually.
Modi turns to India’s vast middle class to revive growth
Union Budget 2025-26: Expenditure Cuts and Employment Concerns
To accommodate these tax reliefs, the government resorted to cutting expenditures in 2024-25, offering no relief to other citizen segments in 2025-26. Groups such as MNREGA workers, daily wage earners, industrial workers, MSMEs, housewives, pensioners, and unemployed youth were seemingly ignored. The Finance Minister implemented cuts across various sectors, including education, social welfare, and urban development. Despite the ₹1 lakh crore expenditure, the central government’s net deficit for 2025-26 is projected to grow at the same 11% rate as in 2024-25.
The Periodic Labour Force Survey (PLFS) indicates a youth unemployment rate of 10.2% for individuals aged 15-29 years in 2023-24, which is lower than global levels.
Youth Unemployment Rate in India Lower Than Global Levels
However, the budget documents offer limited discussion on employment generation schemes, with a significant portion dedicated to the now-defunct Productivity Linked Investment Scheme. The Budget Estimates for 2024-25 allocated ₹28,318 crore for these programs, but the Revised Estimates reduced this to ₹20,035 crore, suggesting underperformance in employment generation initiatives.
Furthermore, the PLFS reports that the Labour Force Participation Rate (LFPR) for individuals aged 15 years and above increased from 57.9% in 2022-23 to 60.1% in 2023-24. The Worker Population Ratio (WPR) also saw an uptick, rising from 56.0% to 58.2% in the same period.
Labour Force Participation Rate and Worker Population Ratio
Union Budget 2025-26: Social Impact and Economic Growth
The Union Budget 2025-26 presents substantial benefits to a specific segment of taxpayers but does so at the expense of broader social welfare and employment programs. This approach raises questions about equitable resource distribution and the government’s commitment to inclusive growth. While tax cuts may stimulate consumption among the middle class, they may not adequately address issues like unemployment, wage stagnation, and social inequality.
Modi’s Government Rolls Out Tax Cuts to Stimulate Growth
If the MPCE of the bottom fifty percent of the population is calculated, it will be even lower, and for the bottom 25 percent of the population, it will be even lower. So how can a family of four survive on a monthly per capita expenditure of Rs. 4000-7000 (or less) including food, electricity, education, healthcare, rent, transport, debt repayment, entertainment, social responsibility and emergencies? The Economic Survey has said that India will have to create 78.5 lakh non-farm jobs every year by 2030.
Takeaways from India’s Budget and Its Impact on Middle Class
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