4th February 2025
Introduction: The Budget addresses the concerns of the economy in a holistic manner without compromising on fiscal consolidation and pleasing all
An initial reading of the Budget 2025-26 shows that it is a growth-oriented, practical and a please-all Budget. There are no provisions in the 60-page speech of the Finance Minister, Nirmala Sitharaman, that can be construed to be negative or disruptive for the overall economy. More importantly, it tries to address the broad concerns of the economy like a slowing GDP, weakening consumption demand, the adverse impact of climate change on agriculture, the decline of the MSME sector and an uncertain global scenario in an incremental and practical manner.
Like in previous years, the finance minister has rightly focused on the rural economy, the poor farmers and the MSME sector, employment generation, securing the country’s energy security, nurturing innovation, ensuring quality education, but with a difference. She has added another dimension in her growth strategy for the coming years by providing much-needed relief to the middle class.
The push for greater consumption in rural and urban markets
By providing substantial tax relief to the middle class—nil tax on income of Rs 12 lakh per year– she has addressed one of the biggest challenges of the current economy. By putting more disposable income in the hands of the growing middle class, she expects a spurt in consumption demand. The focus on increasing private consumption means that brands have something to cheer as they look at the urban markets.
While Sitharaman expects a revenue forgone of about ₹ 1 lakh crore in direct taxes and ₹ 2600 crore in indirect taxes she knows that she can raise the amount through higher GST collection in the coming years.
Despite the challenging global and domestic conditions, Sitharaman has stuck to the fiscal roadmap that she had set out to achieve. She has brought down the fiscal deficit to 4.8%, 1% lower than the Budget estimate of 2024-25. She has also promised to bring it down further to 4.5% in FY 26. Like in the earlier years, Budget 2025-26, has steadfastly focused on government’s capital investment—Rs 10 lakh crore in FY 26—to help India continue to remain fastest growing economy. Another important policy announcement in the Budget is the promise to completely overall the Income Tax Act of 1961 simplifying it and making it easier for people to file their returns.
To strengthen India’s agricultural productivity and boost rural prosperity, Budget 2025-26 has announced new schemes. The Prime Minister Dhan-Dhaanya Krishi Yojana, which will be implemented in association with the states, will help enhance the agricultural productivity of 1.7 crore farmers in 100 districts with low productivity, moderate crop intensity and below-average credit parameters through the convergence of existing schemes and specialized measures. Similarly, the Building Rural Prosperity and Resilience scheme address the issue of underemployment in agriculture through skilling, investment, technology, and invigorating the rural economy. Again, the focus on increasing agricultural productivity and hence rural income will gladden the heart of the marketers as rural markets have been dormant for sometimes now.
A pragmatic approach
In a scenario, where the low-hanging fruits of economic reforms have already been harvested and big bang reforms are extremely difficult to carry out because these are mostly in the realm of the states like land reforms—the Budget has taken incremental steps to push the growth agenda forward by ironing out the existing challenges.
It has allowed 100% foreign direct investment in the insurance sector to carry out its promise of ease of doing business, announced other financial sector reforms, pushed the case of clean energy through the advancement of nuclear energy in the country’s energy basket with the development of small modular reactors, It has also announced public private partnership in Infrastructure and a roadmap for monetisation of assets to invest in new projects. It has also announced security measures for the vulnerable gig economy workers, not forgetting the importance of the study of artificial intelligence for Indian students.
Overall, a practical Budget that addresses the issues of the people, economy and planet, while keeping in mind the imperatives of fiscal consolidations in an uncertain global economy ravaged by war, global supply disruptions and a slowing global economy.
(This story has not been edited by News Mania staff and is published from a Media Release)
