“Inequality is not just a moral issue, it is an economic one because unequal societies are less prosperous, less stable, and less cohesive.” – Joseph Stiglitz
The Union Budget 2025-26 embodies this principle by laying the foundation for India’s next phase of economic development, with a clear emphasis on reducing inequality and promoting inclusive growth. By focusing on workforce formalization, financial inclusion, and infrastructure expansion, the budget aims to close the socio-economic gaps for the poor, youth, farmers, and women. Through targeted reforms that enhance social security, drive employment growth, and increase women’s participation in the workforce, the union budget 2025-26 strives to build a more cohesive and prosperous society. These efforts align with the vision of fostering a stable economy that benefits all, ensuring that no segment of the population is left behind.
Addressing the Poverty Trap and Lack of Social Security
Informal workers often find themselves trapped in cycles of poverty, which significantly impacts their health, nutrition, and overall well-being. Without access to social security, these workers are especially vulnerable during economic downturns or natural disasters. As per the Economic Survey 2021-22, approximately 43.99 crore (439.9 million) workers in India, are engaged in the unorganized sector, which includes gig, platform, and casual workers. In contrast, only about 14% of the workforce, or 47.5 million people, are employed in formal jobs with access to social security benefits. This significant disparity underscores the need for reforms to increase formal employment and expand social security coverage for a larger proportion of the workforce.
The union budget 2025-26 makes significant strides in extending social security to informal workers. The National Social Security Expansion Scheme now includes pension benefits for gig and platform workers, ensuring long-term financial stability. Additionally, a ₹50,000 crore allocation to the Universal Health Coverage Initiative will provide health insurance to the unorganized sector workers. The Direct Income Support Program, designed to offer financial assistance to low-income households, will also help buffer the economic impact of unexpected shocks. These measures are designed to improve the living standards of millions of informal workers and enable their transition into the formal economy.
Strengthening India’s Young Workforce for a Sustainable Future
India’s future economic success hinges on the formalization of its young and dynamic workforce. An overwhelming 86% of India’s workforce is engaged in the informal sector, which hinders their economic advancement. The lack of formal employment contributes to issues like gender inequality, tax evasion, and entrenched poverty. To address this, the Union Budget 2025-26 introduces several initiatives aimed at accelerating workforce formalization by enhancing the manufacturing industry to boost employment opportunities, particularly for the youth.
Key initiatives include the expansion of the Production-Linked Incentive (PLI) scheme to attract more investments in high-growth sectors such as electronics, textiles, and green technologies. The budget also emphasizes fostering innovation and entrepreneurship through tax incentives and financial support for start-ups, especially in technology and manufacturing. A significant focus is placed on skilling programs and vocational training to equip young people with industry-relevant skills, ensuring they are better prepared for emerging job opportunities. Furthermore, Micro, Small, and Medium Enterprises (MSMEs) are highlighted as the second engine of growth, with measures aimed at enhancing their access to credit, easing regulatory burdens, and improving their competitiveness in the global market. MSMEs contribute significantly to employment generation, accounting for 30% of India’s GDP and employing over 11 crore (110 million) people. Additionally, infrastructure development, including the creation of industrial corridors and smart cities, is expected to stimulate job creation and provide long-term benefits to the manufacturing sector, further enhancing youth employment prospects.
Building Rural Prosperity and Resilience
The government is launching several key initiatives aimed at boosting agriculture and promoting rural prosperity, with a strong focus on sustainability and inclusion. One of the flagship initiatives is the ‘Prime Minister Dhan-Dhaanya Krishi Yojana’, which will target 100 low-productivity districts across the country. This program aims to significantly enhance agricultural output by implementing sustainable farming practices, improving local infrastructure, and promoting crop diversification. Special emphasis will be placed on increasing the domestic production of essential crops like pulses, cotton, and a variety of fruits and vegetables. Additionally, the government is taking steps to tackle the issue of underemployment in rural areas by providing skill development programs and creating employment opportunities for women, youth, and small farmers. These efforts are aimed at empowering marginalized communities, ensuring that they have access to necessary resources and opportunities to improve their livelihoods.
The government is also expanding the reach of Kisan Credit Cards (KCC), which will streamline the loan process for farmers and raise the loan limits to enhance their access to working capital. This initiative will provide much-needed financial support, helping farmers invest in better farming practices, expand their operations, and improve productivity. Together, these measures are set to drive rural economic growth, improve agricultural practices, and create sustainable opportunities for millions of Indians in rural areas.
Closing the Gender Gap by Empowering Women
India’s female workforce participation has improved in recent years, rising from 21.1% in 2017-18 to 35.6% in 2023-24, with rural areas showing notable growth. Despite this progress, women in the informal sector continue to face challenges, as over 30.58 crore (305.8 million) unorganised workers, including gig and platform workers, are registered on the e-Shram portal. These informal jobs typically offer low wages, lack social security, and provide no contracts or paid leave. To address these disparities, the government plans to provide unorganised workers registered with the e-Shram portal with a Universal Account Number (UAN) for access to social security benefits and the Pradhan Mantri Shram Yogi Maan-dhan scheme will offer pensions to eligible workers.
To improve female labor force participation, the 2025 budget outlines specific interventions. The Women Workforce Incentive Scheme offers financial incentives to companies that hire women in critical sectors. Expanding affordable childcare facilities in both urban and rural areas aims to relieve the burden on working mothers. Additionally, a ₹20,000 crore Women Entrepreneurship Fund has been established to support women-led startups and MSMEs. To further this agenda, funding for skill development programs in fields like technology and manufacturing will help women enter the formal workforce. Together, these measures aim to close the gender gap and boost women’s participation, which is essential for sustainable economic growth.
The Union Budget 2025-26 outlines a strategic vision to boost India’s economic growth by formalizing the workforce, expanding social security, and enhancing infrastructure. Key measures include promoting youth employment, strengthening MSMEs, and supporting women’s participation in the workforce through skill development, financial incentives, and entrepreneurship programs. The focus on agriculture and rural prosperity aims to improve productivity and income for farmers. These initiatives collectively aim to bridge socio-economic gaps, foster inclusive growth, and lay the foundation for a more resilient and prosperous India. This budget aspires to achieve the vision set forth by Nobel laureate Amartya Sen: “The goal should be to create a virtuous cycle of growth and inclusion, where the fruits of economic progress reach everyone and uplift all sections of society.”
