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Over 92 per cent of the Indian working population is engaged in informal work. The latest Economic Survey admits that real wages for 80 per cent of the workers have not increased in the last five years. The need is for every budget to be a ‘budget for the working class’. We must look at strengthening ‘localised solidarity economies’ that helps foster mutual cooperation and community resilience
By Dipali Sharma
The leading UK-based daily, the Financial Times, termed India’s Union Budget 2025-26 as a “boost for India’s middle class”. According to its report, the budget introduces significant tax cuts for the middle class with income up to ₹1.2 million now tax-free and adjusted tax brackets benefiting those earning up to ₹2.4 million. This move is anticipated to boost consumer spending and stimulate economic growth.
However, it also notes that this tax break will cost the government ₹1 trillion in revenue, raising concerns about potential impacts on capital expenditure plans and the fiscal deficit.
The FT report sums up a major aspect of the budget process, how to serve people, and how to find the funds to do so.
Since the discontinuation of Five-Year Plans in 2017, India’s Annual Budget has gained even more importance as the primary economic planning tool. It plays a critical role in allocating resources, setting policy priorities, and driving economic growth. It also provides citizens with a window into the mind of the government, how it proposes to respond to the needs of its citizens – all of them.
However, at a time when the Union Finance Ministry itself admits that only about 6.68 per cent of Indians filed income tax returns for FY 2023-2024, of which only about 27 per cent filed positive returns, it is clear that the proposed tax relief will only benefit a small per cent of Indians who are salaried persons in formal employment.
However, over 92 per cent of the Indian working population is engaged in informal work. The latest Economic Survey admits that real wages for 80 per cent of the workers have not increased in the last five years. In such a situation, the need is for every budget to be a ‘budget for the working class’. It would be in the long-term interest of the economy if investments are made for the majority of the working classes.
The Union Budget 2025-26 introduces several measures aimed at supporting India’s informal workforce. It is good to note that the allocation for rural development has increased from 4.08 per cent in FY 25 to 5.24 per cent in FY26 BE. It is good that the allocation for other schemes such as the PM Awas Yojana (both rural and urban) and the National Rural Livelihood Mission have also increased. The budget has also proposed a new employment generation scheme to generate employment with an allocation of Rs 20,000 crore.
There is provision made for enhancing social security for Gig and Platform Workers. The government plans to facilitate the registration of gig workers on the e-Shram portal and issue them identity cards.
This initiative aims to integrate gig workers into the formal economy, providing them with official recognition and access to various benefits. Gig workers will be provided healthcare benefits under the Pradhan Mantri Jan Arogya Yojana (PM-JAY), ensuring access to essential medical services.
A scheme focused on the socio-economic upliftment of urban workers is set to be implemented. This programme aims to enhance incomes, promote sustainable livelihoods, and improve the quality of life for urban informal workers.
Building on the success of the PM SVANidhi scheme, which has benefited over 6.8 million street vendors, the government plans to revamp the programme. Enhancements include increased loan amounts from banks, the introduction of UPI-linked credit cards with a Rs 30,000 limit, and capacity-building support to empower street vendors economically.
However, many feel that these initiatives are inadequate and that the budget represents a missed opportunity.
Despite rising inflation, job instability, and economic slowdown, the budget did not announce any direct cash transfer scheme or universal basic income (UBI)-like programmes for informal workers. The expansion of social security for gig workers is vague, with no details on unemployment benefits, pension schemes, or accidental insurance.
The MGNREGA (which provides 100 days of employment to rural informal workers) saw no significant budget hike, despite high rural distress. Neither was it extended to urban areas, a move recommended by many.
The budget did not address labour reforms that could offer job security, minimum wage protections, or safety benefits to informal workers. Gig economy workers (Swiggy, Zomato, Uber drivers, etc,) remain vulnerable to exploitation, with no mention of a national framework for their rights.
The government aims to increase formal employment, but no roadmap was provided on how informal workers will be transitioned to formal, stable jobs. Many informal workers lack the skills for higher-paying jobs in manufacturing and services. The Skill India Mission did not receive any new funding push to support informal workers’ transition to better jobs.
As per the Period Labour Force Survey data, we know that employment in the agriculture sector has risen after the pandemic. Given this, the budget could do well with enhanced investments in this sector. However, the allocation for Department of Agriculture and Farmers Welfare for FY 2025-26 (Rs 1.27 lac crores) is lesser than the RE for 2024-25 (Rs 1.31 lac crore).
Within this, the budget allocation for the Pradhan Mantri Fasal Bima Yojna (crop insurance scheme) has been decreased and so is the budget allocation for the fertiliser department. which will impact the fertiliser subsidy to farmers. Indian farmers have long been demanding guarantee for minimum support price for crops, waiver of loans, pensions and compensations.
The Economic Survey rightly raises concern about the rising income inequality – “the disproportionate rise in corporate profits, slight uptick in the labour share of GVA (gross value added), but stagnant wage growth. Sustained economic growth hinges on bolstering employment incomes, which directly fuel consumer spending, spurring investment in production capacity,” the Survey said.
Income inequalities and rising poverty levels with unemployment/under employment/unpaid work, and lack of social safety and protections are major challenges in front of the country. After some progress in the post-pandemic period, ‘growth’ continues to elude us with the mounting challenges of climate change, impact of AI on jobs, along with possibilities of newer headwinds from the North (read new government in the US).
Deeper reforms will be required in the economic policy towards one which enables long term job creation and enhances real wages across India, beyond the temporary focus on the urban middle classes. In a context of enhanced precarities faced by the millions in informal workers, solutions have to be multifaceted.
We must look at building and strengthening ‘localised solidarity economies’ that helps foster mutual cooperation and community resilience. We must look at creating and incentivising climate resilient and AI resilient jobs.
While the Union Budget 2025-26 offers some positive steps (social security expansion, PM SVANidhi boost), it falls short of addressing the deep-rooted vulnerabilities of India’s informal workers. There is no direct income support, no major labour protections, no rural employment expansion, and no clear pathway for formalization.
The informal workforce, which carried the burden during the COVID-19 crisis, was expecting stronger government intervention, but the budget has largely focused on tax relief for the middle class and industrial growth, rather than workers’ welfare.
For true economic inclusion, India needs a comprehensive informal worker policy that goes beyond token welfare measures and provides long-term income stability, legal protection, and job security. We need to recognize that it is with a ‘working-class budget’ that we can most effectively move towards our vision of a ’Viksit Bharat’.
Dipali Sharma is Director, Organizational Effectiveness and Programmes, at ActionAid Association. The views expressed here are personal and do not necessarily reflect those of ActionAid Association.
Pictures by : Amit Sengupta.