Compassionate Capitalism

THE UNION BUDGET on February 1 introduced a slew of reforms that can take India’s growth to the next level. We believe that these announcements will boost small businesses, startups, and women entrepreneurs and give middle-class families much-needed financial relief. It might also secure a better future for contractual workers.

A closer look at key points of Budget 2025-26 highlights the government’s intent to build a system that works like a well-oiled machine in the long run. Overall, the focus is on making things easier for businesses, ensuring people have steady jobs, and reducing tax burdens.

WOMEN’S OPPORTUNITIES

As India enters the fiscal year 2025-26, it also marks two decades of gender budgeting—an important milestone in the country’s journey towards inclusive economic growth. Finance Minister Nirmala Sitharaman’s Budget address underscored the govern­ment’s vision for a Viksit Bharat by 2047, with “women-led development” as a key pillar, among other significant updates.

A particularly ambitious target this year is to integrate 70 per cent of women into the workforce, signalling a strong commit­ment to gender equality. One of the standout initiatives in this year’s Budget is a new scheme designed to support first-time entrepreneurs, including women, with term loans of up to ₹2 crore over the next five years. This aligns with the broader push to enhance women’s workforce participation, which has seen gradual improvement, with the Female Labour Force Participa­tion Rate (FLFPR) rising to 41.7 per cent in 2023-24.

Support for rural employment remains a priority, with the Mahatma Gandhi National Rural Employment Guaran­tee Scheme (MGNREGS) receiving an increased allocation of ₹ 40,000 crore, up from ₹ 37,654 crore in 2024-25. Women accounted for 57.8 per cent of person-days worked under this scheme, reflecting its importance in empowering rural women. However, only 33.6 per cent of this allocation is reflected in the gender budget—highlighting the need for better recognition of women’s contributions in financial planning.

While the government continues to allocate substantial resources for women, real progress depends on effective imple­mentation. A key step towards meaningful change would be the introduction of a Gender Budgeting Act, as recommended by NITI Aayog. This Act would institutionalise gender-responsive budgeting across all ministries and states/UTs while mandating the collection and publication of gender-disaggregated data—an essential tool for tracking progress.

To further encourage women’s workforce participation, in­vestments in health, education, and skill development must be prioritised. Additionally, addressing the unpaid care burden— which accounts for 15-17 per cent of India’s GDP—through paid leave policies, care service subsidies, and caregiver skill-building initiatives could significantly boost economic inclusion.

ENCOURAGING STARTUPS

The government is also keen on encouraging India’s startup ecosystem. One major move that the government has made in that direction is the expansion of the Fund of Funds for Startups (FFS), increasing its corpus from ₹ 10,000 crore to ₹ 15,000 crore. This expansion is targeted at emerging sectors, particularly clean technology, artificial intelligence, and deep tech. Under a co-investment model, the government will match up to 50 per cent of investments made by private venture capitalists and angel investors, ensuring startups have better access to early-stage funding. By facilitating easy access to equity financing, startups will have more capital to invest in product innovation and advanced technology, further positioning India as a leader in technology-driven entrepreneurship.

Moreover, it is generally seen that the capital that is flowing into startups mostly originates outside India. And funding of Indian startups is impacted whenever there is funding winter in other major economies. However, having a domestic capital base for startups will help them reduce their reliance on foreign capital.

CREDIT SUPPORT FOR MSMEs

Many MSMEs have struggled with working capital and credit access, and this Budget aims to address these challenges. The government has increased the credit guarantee cover for MSMEs from ₹ 2 crore to ₹ 5 crore, making it easier for them to access bigger loans with less risk. Startups can now access credit guarantees of up to ₹ 20 crore which might make it easier for them to fund their growth. We expect this to ease the financial pressure on small businesses, allowing them to focus on innova­tion and expansion.

In addition to credit cover, the government has also announced special credit cards for MSMEs registered under the Udyam portal. This initiative could be a game-changer for micro-enterprises, offering greater flexibility in managing cash flow and expenses. It may also reduce working capital constraints and help integrate MSMEs more effectively into the formal financial system.

The primary focus of the govern­ment and other stakeholders should be on ensuring easier access to credit by simplifying and streamlining the process and reducing paperwork. Additionally, promoting financial literacy and education on credit management would be essential for MSMEs to make an informed financial decision.

MIDDLE-CLASS BONANZA

A significant Budget highlight was the tax relief under the new income-tax regime. The government has stat­ed that there will be no tax on income up to ₹ 12 lakh, with an additional deduction of ₹ 75,000. This move is expected to increase disposable in­come to spend, save, or invest. How­ever, its actual impact will depend on economic trends and individual tax slabs as per the new tax regime.

We believe that this increase in consumption will also provide a boost to the Indian economy. Past studies have shown that domestic de­mand, mostly urban, has been muted in the last few months. Everyone was looking for a way that might boost the urban consumption story. And there are expectations that this move might boost consumption, which can stimulate economic growth.

But will people spend money? It is too early to come to any definitive conclusion. We will need to closely monitor economic trends along with potential changes in interest rates.

FORMALISING THE GIG ECONOMY

There has been a lot of discussion around ESOPs and the startup ecosystem in general. However, one key element that is often overlooked is the role of gig workers.

For years, this workforce—comprising delivery personnel, ride-hailing drivers, freelancers, and others—has operated in a grey area with little to no social security. But now the govern­ment is stepping up to address their needs. The introduction of a new ID system for gig workers is a big step towards formalising the gig economy.

The finance minister announced significant measures for gig workers, especially delivery agents, stating that they would be provided health insurance under the government’s flagship Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY)—a major step forward, given the physi­cally demanding nature of their work. This is sound judgement, but it has also raised concerns that these temporary workers still lack a com­prehensive national law, a dedicated welfare board, and full implementa­tion of these measures.

Additionally, the e-Shram portal will be expanded to provide official identity cards and workforce regis­tration, bridging the gap between informal work and formal recogni­tion, and further opening up more av­enues for financial and social benefits.

While these initiatives mark progress, more needs to be done. A holistic framework covering pen­sion benefits, long-term financial security, and structured dispute resolution mechanisms is essen­tial. Startups must also play a role by offering financial literacy pro­grammes, upskilling initiatives, and access to wealth-building op­portunities. This will ensure that on-demand workers not only ben­efit from short-term relief but also build long-term financial resilience.

For the initiative to succeed, clear guidelines on employer contributions, compliance norms, and sustainable implementa­tion strategies are necessary to ensure workers receive tangible benefits rather than just enrolment in welfare programmes.

To conclude, we believe that the central theme of this Budget is empowerment—whether it is the empowerment of women, the middle class, freelance workers, or small businesses. The measures announced are expected to drive the economy forward by boosting domestic demand and growth.

Additionally, these initiatives could make it easier for startups to secure funding and overcome financial challenges, which has been a growing concern in the ecosystem.

While the Budget appears sustainable, the key question remains whether it will bring significant change to the middle class and have a lasting impact on the broader economy. Only time will tell how effectively these measures translate into tangible benefits.

capitalismcontractual workersfemale empowermentFinance Minister Nirmala SitharamanIndian womenOpenomics 2025Union Budget 2025woman entrepreneur