UPSC Issue at a Glance is an initiative of UPSC Essentials to focus your prelims and mains exam preparation on an issue that has been in the news. Every Thursday, cover a new topic in Q&A format. This week’s issue is focused on the Union Budget 2025-26. Let’s get started! What is the issue? Union Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 on Saturday (1st February). In her speech, she highlighted four engines of development for the 2025-26 fiscal year: agriculture, micro, small, and medium enterprises (MSMEs), investments, and exports. "The fuel for this journey is provided by reforms, the guiding principle is inclusivity, and the destination is Viksit Bharat," stated the Finance Minister. In this context, understanding the highlighted engines of growth is crucial. Why is the Union Budget relevant? The Union Budget is a crucial component of the UPSC syllabus. Understanding its facts, figures, and analysis is significantly important for every stage of the UPSC Civil Services Examination (CSE). Therefore, it is essential to understand the Union Budget from a broader perspective. UPSC Syllabus: Preliminary Examination: Current events of national importance, economic development Mains Examination: General Studies-II, III: Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment, Government budgeting; Government policies and interventions for development in various sectors and issues arising out of their design and implementation. What will you learn from this article? What does the Union Budget say on agriculture and how do experts analyse it? What are the major announcements for India's MSME sector in the Union Budget, and what do experts say about it? How does the Union Budget address investment-related challenges to stimulate economic growth? How does the Union Budget align with India’s goal of becoming a global export hub? Question 1: What does the Union Budget say on agriculture and how do experts analyse it? Agriculture, which supports more than 60 per cent of India’s population, is a major part of the country’s rural economy. Finance Minister Nirmala Sitharaman Saturday said that agriculture was one of the four engines driving India’s development journey and announced several new initiatives for the sector. Some of the key initiatives are: 1. Prime Minister Dhan-Dhaanya Krishi Yojana (PMDDKY): PMDDKY will be implemented in collaboration with states, across 100 districts in its first phase. The scheme aims to increase agricultural productivity, adopt crop diversification and sustainable agriculture practices, improve post-harvest storage after harvest at the panchayat and block levels, improve irrigation facilities, and provide short-term and long-term credit. 2. National Mission on High Yielding Seeds: A National Mission on High Yielding Seeds will be launched, aimed at (1) strengthening the research ecosystem, (2) targeted development and propagation of seeds with high yield, pest resistance and climate resilience, and (3) commercial availability of more than 100 seed varieties released since July 2024. 3. Pulse Mission: The government has announced an allocation of Rs 1,000 crore for a six-year initiative called the “Pulse Mission,” aimed at boosting pulse production to achieve self-sufficiency. This initiative will focus on three types of pulses: tur (arhar), urad (mash), and masoor. 4. Makhana board for Bihar: A Makhana Board will be set up in Bihar to boost the cultivation and marketing of fox nuts. The people engaged in Makhana cultivation will be organised in FPOs. Bihar accounts for approximately 90% of India’s makhana production. 5. Rural Prosperity and Resilience’ program: A holistic, multi-sectoral ‘Rural Prosperity and Resilience’ program will be launched in collaboration with states. This initiative aims to tackle under-employment in agriculture by promoting skill development, investment, technology adoption, and revitalization of the rural economy. What is the Union Budget? The Union Budget (called the Annual Financial Statement under Article 112 of the Constitution of India) provides an account of the government’s financial health. It shows details about a government’s finances by providing the estimated receipts and expenditures of the Government of India for the current financial year, along with revised estimates for the last financial year and actuals for the last to last financial year. 6. New urea plant to come up in Assam: Finance Minister on Saturday announced the setting up of a new urea plant with an annual production capacity of 12.7 lakh tonnes (lt) at Namrup in Assam. 7. Grameen Credit Score: Finance Minister Nirmala Sitharaman also announced Grameen Credit Score, a framework to be developed by the public sector banks for the credit needs of the members of Self Help Groups (SHGs) and people in rural areas. 8. Mission for Cotton Productivity: For the benefit of cotton growing farmers a 5-year ‘Mission for Cotton Productivity’ is announced. 9. Enhancing loan limits for farmers: The finance minister also announced increasing the loan limit under the Modified Interest Subvention Scheme (MISS) from Rs 3 lakh to Rs 5 lakh. Analyzing the announced initiatives for the agriculture sector in Union Budget 2025, Ashok Gulati and Raya Das write- The big question from the agriculture segment of the Union Budget for FY26 is whether it can bring in climate resilience, and augment the productivity and incomes of farmers and farm labourers. There are several initiatives announced for agriculture that are likely to help the farming community. The special focus on 100 districts to augment agri-productivity, promote sustainable farming practices and crop diversification, extending credit access through Kisan Credit Cards from Rs 3 lakh to Rs 5 lakh, starting a Pulses Mission to attain atma nirbharta in tur, moong and urad, etc., are all steps in the right direction. So is the setting up of a Makhana Board in Bihar. How far they will go in achieving their objectives remains to be seen. While the Union Budget 2025-26 makes some progress in addressing agricultural challenges, the overall approach remains incremental rather than transformational. A paradigm shift is needed — one that moves away from subsidy-heavy interventions towards investment-driven growth, greater private sector participation, and technology-led efficiency improvements. The path to making Indian agriculture more resilient and globally competitive requires bold reforms in subsidy rationalisation, infrastructure development, and market linkages. Only then can India achieve the goal of Vikshit Bharat and position itself as an agricultural powerhouse by 2047." Question 2: What are the major announcements for India's MSME sector in the Union Budget, and what do experts say about it? Giving new definitions for micro, small and medium enterprises (MSMEs) and announcing a slew of initiatives to help such businesses, Finance Minister Nirmala Sitharaman in her Budget speech termed them the second power engine for development. It encompasses manufacturing and services with a focus on MSMEs numbering 5.7 crore. Several key initiatives announced to address the challenges faced by the manufacturing sector, particularly for MSMEs are: 1. Definition of MSMEs widened: In her Budget speech, Finance Minister said the investment and turnover limits for classification of all MSMEs will be increased 2.5 and two times respectively. This means the investment limit to be classified as a micro enterprise goes up to Rs 2.5 crore. For small enterprises, this limit goes up to Rs 25 crore, and for medium ones, it becomes Rs 125 crore. Similarly, the turnover limit for these classifications goes up to Rs 10 crore for micro enterprises, Rs 100 crore for small ones, and Rs 500 crore for medium enterprises. 2. Credit Guarantee Limit Increased: The Union Finance Minister also announced the enhancement of the credit guarantee cover from Rs 5 crore to Rs 10 crore for micro and small enterprises, and from Rs 10 crore to Rs 20 crore for startups. As part of the initiatives for MSMEs, she announced that a National Institute of Food Technology, Entrepreneurship and Management will be established in Bihar. 3. Customised credit cards: Customised credit cards with a limit of Rs 5 lakh were announced in the Budget for micro enterprises registered on the Udyam portal. In the first year, 10 lakh of these cards will be issued. High-level committee for regulatory reforms Union Finance Minister also emphasised the need for a light touch regulatory framework based on principles and trust, which could unleash productivity and employment. The government plans to set up a high-level committee for regulatory reforms, which will review all non-financial sector regulations. Notably, the Economic Survey 2024-25 has said that deregulation is more critical for MSME growth than large enterprises. 4. National Manufacturing Mission: The Union Finance Minister said in her Budget speech that the Central government will set up a National Manufacturing Mission for small, medium and large industries with a focus on clean tech manufacturing. The mission’s mandate will include five focus areas – ease and cost of doing business, upskilling for in-demand jobs, MSMEs, availability of technology, and quality products. 5. Scheme for First-time Entrepreneurs: A new scheme will be launched for 5 lakh women, Scheduled Castes and Scheduled Tribes first-time entrepreneurs. This will provide term loans up to Rs 2 crore during the next 5 years. Union Finance Minister's announcements for MSMEs has overall been welcomed by the sector. The Economic Survey has rightly pointed out the need to promote labour-intensive sectors with skill upgradation so that their productivity, and thus, their incomes, improve. The organised manufacturing sector so far has gone in for more capital-intensive choices rather than labour-intensive ones. Deregulating MSMEs is one way to move forward as they create a bulk of employment in the country, after agriculture.- Ashok Gulati and Raya Das The initiatives to address the funding and logistical challenges of the MSME sector aim to provide good momentum to an important part of our economy; however, its execution is something we need to wait and see. Question 3: How does the Union Budget address investment-related challenges to stimulate economic growth? Union Budget 2025 identifies investment as the third engine of India's growth. It focuses on investing in people, the economy, and innovation. The following initiatives have been announced in the budget: 1. Urban Challenge Fund: The Government will establish a ₹1 lakh crore Urban Challenge Fund to support initiatives like ‘Cities as Growth Hubs,’ ‘Creative Redevelopment,’ and ‘Water & Sanitation’. The fund will cover up to 25% of viable project costs, requiring at least 50% funding from bonds, bank loans, or PPPs. ₹10,000 crore is allocated for 2025-26. 2. Public Private Partnership in Infrastructure: Each infrastructure-related ministry will come up with a 3-year pipeline of projects that can be implemented in PPP mode. States will also be encouraged to do so and can seek support from the IIPDF (India Infrastructure Project Development Fund) scheme to prepare PPP proposals. 3. FDI in Insurance Hiked: Union Finance Minister announced a significant hike in foreign direct investment (FDI) in the insurance sector — from 74% to 100% — paving the way for the entry of global insurance giants, substantial foreign investments and tough competition in the Indian market. Foreign investments will also provide much-needed capital to the Indian insurance sector, enabling insurers to offer better products and services. 4. SWAMIH Fund 2: It will be established as a blended finance facility with contribution from the Government, banks and private investors. The existing Special Window for Affordable, Mid-Income Housing (SWAMIH) scheme aims to help middle-class families who pay EMIs on loans taken for apartments, and rent on their current dwellings. Do you Know? Investment Friendliness Index of States will launched this year for competitive cooperative federalism. 5. Nuclear Energy Mission for Viksit Bharat: A Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of Rs. 20,000 crore will be set up. At least 5 indigenously developed SMRs will be operationalized by 2033. 6. Deep Tech Fund of Funds: Investing in innovation the budget announced a ‘Deep Tech Fund of Funds’ for next generation startups and ten thousand PM research fellowships for technological research in IITs and IISc in next 5 years. 7. Maritime Development Fund: This fund will be set up with a corpus of Rs 25,000 cr. It will support the long-term financing of the maritime industry. Aims at distributing support and promoting competition. Upto 49% GoI support, rest by ports, private sector. 8. Historic Tax Cut: The finance minister has raised the limit of income tax rebate from Rs 7 lakh to Rs 12 lakh, which essentially means that if an individual has an income of up to Rs 12 lakh, she will have zero tax liability. Udit Mishra writes- "Many observers have pointed out that companies were unwilling to invest in fresh capacities until they could be sure there was enough demand in the economy for their products. Saturday’s Budget announcement of a massive income tax break is an acceptance by the government that more than anything else, the private sector investments require robust consumer demand. Almost everything else — corporate income tax and interest rates and the condition of roads — is secondary. The hope now is that consumers will spend the additional money in hand — around Rs 1 lakh crore that the government is foregoing as revenues — and that this will provide corporates with the essential reason to invest in new capacities, create jobs, and further spur economic growth. However, there is a crucial element still lacking in the Budget: a comprehensive strategy for economic growth without which tax cuts will not be enough." Nilesh Shah writes- "The budget has invested in the future by allocating Rs 10,000 crore for a start-up Fund of Fund scheme; Rs 25,000 crore for shipbuilding through a Maritime Development Fund; and Rs 20,000 crore for small modular nuclear reactors. All these investments are futuristic and could have a multiplier effect on the economy. Markets are driven by flows, sentiments, and fundamentals. This budget will maintain positive domestic investor sentiment, encourage domestic flows to the capital market, and improve corporate profits over time." Question 4: How does the Union Budget align with India’s goal of becoming a global export hub? Finance Minister Nirmala Sitharaman identified exports as a key engine for development over the coming year. To this end, she announced five initiatives: 1. Export Promotion Mission: This mission will be driven jointly by the Ministries of Commerce, MSME, and Finance. It aims to facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets. 2. BharatTradeNet: A digital public infrastructure, ‘BharatTradeNet’ (BTN) for international trade will be set up as a unified platform for trade documentation and financing solutions. The BTN will complement the existing Unified Logistics Interface Platform, which allows industry players to access logistics-related datasets from various government systems. 3. Global Supply Chain Integration: Support domestic manufacturing to integrate India’s economy into global supply chains, focusing on Industry 4.0 and youth talent. 4. National Framework for Global Capability Centres: As guidance to states for promoting Global Capability Centres (GCCs) in emerging tier 2 cities. GCCs offer support to MNCs. The proposed policy aims at enhancing availability of talent and infrastructure, building-byelaw reforms, and mechanisms for industry collaboration. 5. Warehousing facility for air cargo: To facilitate the upgradation of infrastructure and warehousing for air cargo including high-value perishable horticulture produce. In the context of global uncertainty, the export-related initiatives of government hold great importance, as they not only determine economic gains but also shape our international relations. Rajat Kathuria and Neha Gupta wrote on January 30 in The Indian Express - "Although the Union budget is not the best place to look for trade-related announcements, it has become one of the several platforms that communicates India’s policy engagement with the global economy. Unquestionably, policy instability takes its toll on exports and FDI. India’s export growth remains stagnant; its share in global exports lingers around two per cent. Trade policy requires comprehensive reform, including the establishment of a dedicated committee to ensure policy consistency and to formulate an action plan to achieve the objective of $2 trillion in exports by 2030. In this regard, the recent declaration by the CEO of NITI Aayog that “India is one of the few (big) economies which is not a part of large trade agreements” needs serious evaluation. Mega trade blocs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) are reshaping global trade, but India is ambivalent about their utility. However, a word of caution. By itself, trade openness will not deliver unless accompanied by domestic reform to remove structural deficiencies. All things considered, a re-evaluation of the pessimism surrounding trade agreements is called for." Post Read Questions Prelims (1) Consider the following statements: 1. Revenue expenditure does not result in the creation of assets for the Government of India. 2. Capital expenditure reduces the government’s liability or increases the government’s assets. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 (2) Along with the Budget, the Finance Minister also places other documents before the Parliament which include ‘The Macro Economic Framework Statement’. The aforesaid document is presented because this is mandated by (UPSC CSE 2020) (a) Long-standing parliamentary convention (b) Article 112 and Article 110(1) of the Constitution of India (c) Article 113 of the Constitution of India (d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003 (3) With reference to the Union Government, consider the following statements: (UPSC CSE 2015) 1. The Department of Revenue is responsible for the preparation of the Union Budget that is presented to the Parliament. 2. No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India. 3. All the disbursements made from Public Account also need the authorization from the Parliament of India. Which of the statements given above is/are correct? (a) 1 and 2 only (b) 2 and 3 only (c) 2 only (d) 1, 2 and 3 (4) There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit? (UPSC CSE 2016) 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalizing subsidies 4. Reducing import duty Select the correct answer using the code given below: (a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2, 3 and 4 Mains (1) Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (UPSC CSE 2021) (2) What were the reasons for the introduction of Fiscal Responsibility and Budget Management (FRBM) Act, 2003? Discuss critically its salient features and their effectiveness. (UPSC CSE 2013) PRELIMS ANSWER KEY (c) (d) (c) (c) (Sources: PM Dhan-Dhaanya, New urea plant to come up in Assam, Ashok Gulati, Raya Das on Budget 2025, National Manufacturing Mission MSME soon, Definition of MSMEs widened, credit guarantee limit increased, FDI in insurance hiked to 100%, paving way for entry of foreign giants, Union Budget 2025 Explained Highlights, Union Budget 2025 : Key highlighs, Critics don’t get it — free trade is good for India) If you missed last week’s UPSC Issue at a Glance | DeepSeek breakthrough: 4 Key Questions You Must Know for Prelims and Mains from the Indian Express, read it here. For your queries and suggestions write at roshni.yadav@indianexpress.com 🚨New Year Special: Click Here to read the January 2025 issue of the UPSC Essentials monthly magazine. 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