THE UNION BUDGET is always a significant annual event that sets the policy tone and agenda for the next financial year. But Budget 2025-26 will be even more special and vital. It will set apart Nirmala Sitharaman as just one of the few Finance Ministers in India who have presented as many as eight Union Budgets. Apart from her, just three previous Union Finance Ministers Morarji Desai, P. Chidambaram, and Pranab Mukherjee-have had the privilege to present eight or more Union Budgets.

However, apart from this rare honour, the Union Budget 2025-26 comes at a time when the economy is facing challenges on almost all fronts. Domestically, growth is slowing and is now estimated at 6.4% for this fiscal and at less than 7% in FY26. Retail inflation has remained stubbornly high and is seen to average 4.8% in FY25. This has impacted urban consumption demand, which has shown signs of moderation in recent months.

Meanwhile, manufacturing growth is still sputtering, and private investment and capex are yet to fully kick in. Job creation and skilling and upskilling of workers and providing policy support to micro, small and medium enterprises (MSMEs) remain other key challenges.

The external environment, too, remains full of challenges that are playing out on the domestic economy. Global growth remains muted, keeping demand for Indian exports subdued. Two wars continue to wage in different parts of the world and any escalation of the conflict in the Middle East could potentially tip the scales on India's crude oil supplies. In the US, President-elect Donald Trump is set to be sworn in on January 20, 2025, and his policies on not only tariff but other economic issues could have a direct impact on India in terms of exports as well as inflation and the value of the rupee vis-à-vis the US dollar. The rupee has already breached 86 to a dollar and concerns remain about further depreciation that could possibly lead to imported inflation.