The Union Budget for 2025 is
poised to be one of the most critical financial blueprints for India,
particularly as the country navigates a global economic landscape riddled with
uncertainties while maintaining its position as one of the fastest-growing economies
in the world. As the Indian government prepares to unveil its vision for the
next fiscal year, there are several key areas where Budget 2025 must focus,
including tax reforms, capital expenditure deployment, gender inclusivity, and
measures to boost startups and youth empowerment.
This article provides a
comprehensive analysis of what to expect from Budget 2025, delving into India’s
economic resilience, the need for reforms, and strategies for creating an
inclusive, innovation-driven economy.
1. India’s Economic Resilience: A Solid Foundation
Recovery Post-Pandemic
India’s economic recovery
post-pandemic has been nothing short of remarkable. Despite challenges such as
global inflation, supply chain disruptions, and geopolitical tensions, the
Indian economy has showcased resilience and adaptability. Real GDP growth has
remained robust, with estimates placing it at around 6.5% for FY 2024-25, a
stark contrast to the negative growth experienced during the COVID-19 pandemic.
The resilience is attributed to:
1. Strong Domestic Demand: Post-pandemic
consumption has surged, driven by rising urban and rural incomes.
2. Government Interventions: Programs like the
Atmanirbhar Bharat Abhiyan provided fiscal stimulus to sectors such as MSMEs,
manufacturing, and infrastructure.
3. Global Supply Chain
Realignment: India emerged as a viable alternative for global manufacturers,
attracting investments in electronics, pharmaceuticals, and renewable energy.
Key Economic Indicators
• Inflation
Management: Inflation has been moderated to 4.7% as of December 2024, aided by
efficient monetary policies by the Reserve Bank of India (RBI).
• FDI and Exports: FDI inflows have
continued to grow, with $84 billion in FY 2023-24, while exports of services,
particularly in IT and digital solutions, remain strong.
• Fiscal Consolidation: The fiscal
deficit, targeted to be 4.5% of GDP by FY 2025-26, reflects prudent fiscal
management, even amidst large-scale public spending.
2. Income Tax Reforms: Relief for Individuals
Income tax reforms have
historically played a significant role in boosting consumer spending, a
critical driver of India’s GDP. However, the middle class, which forms the
backbone of India’s economy, has often felt constrained by high taxation rates
and limited disposable income.
Budget 2025 provides an opportunity to address this issue. While previous budgets, including the one in 2020, introduced a simplified new tax regime, its adoption has been lukewarm due to the elimination of popular exemptions.
What to Expect in Budget 2025
1. Increase in Basic Exemption Limits:
The current exemption is recommended to be increased to ₹10 lakh, providing relief to lower-income groups and
ensuring more disposable income for the middle class.
2. Lowering Rates for the Middle Class:
Tax rates for the ₹10 lakh - ₹20 lakh brackets could be reduced further to spur consumption, which has a direct
multiplier effect on the economy.
3. Enhanced Standard Deduction:
The standard deduction for
salaried individuals and pensioners could be increased to ₹1.5 lakhs to offset inflationary pressures.
4. Support for Senior Citizens:
Senior citizens could see an increase in the exemption threshold to ₹10 lakh, recognizing their unique financial needs. We also have to take into consideration changing social fabric of elderly citizens - being left alone by their children
5. Incentives for Savings:
Reintroducing tax exemptions for
savings instruments like PPF, ELSS, and insurance premiums under the new tax
regime could encourage a culture of savings while stimulating long-term
investments.
3. Capital Expenditure: Building India’s Future
The government’s focus on capital
expenditure (capex) has been a cornerstone of its growth strategy. The ₹10 lakh
crore allocation for FY 2024-25 marked a significant 33% increase over the
previous year, reflecting an unprecedented commitment to infrastructure
development.
Capex spending has a multiplier
effect, generating jobs, boosting industrial activity, and enhancing India’s
global competitiveness.
Key Areas for FY 2025-26
1. Infrastructure Development:
• Completion of PM Gati Shakti
projects, including expressways, freight corridors, and ports.
• Focus on Tier-2 and Tier-3 cities
to promote balanced urbanization.
• Expansion of metro networks in
cities like Indore, Jaipur, and Lucknow.
2. Renewable Energy Transition:
• Greater investment in solar and
wind energy, with specific targets for green hydrogen production.
• Incentives for electric vehicle
(EV) infrastructure, including charging stations and battery production.
3. Rural Development:
• Enhanced allocation for rural
infrastructure under the Pradhan Mantri Gram Sadak Yojana.
• Investments in water supply
schemes and irrigation systems to support agricultural growth.
4. Healthcare and Education:
• Increased funding for Ayushman
Bharat Digital Health Mission to expand healthcare access.
• Setting up smart classrooms and
digital libraries under PM e-Vidya to revolutionize education.
5. Private Sector Participation:
• Public-private partnerships (PPPs)
for infrastructure projects could be incentivized to attract private investment
and expertise.
4. Gender-Neutral Budgeting: A Step Toward Equality
Despite significant progress, gender inequality persists in India, particularly in workforce participation and access to opportunities. Historically, budgetary allocations have focused on women-specific programs. While these efforts are commendable, a gender-neutral approach ensures inclusivity for all genders, including men, women, and LGBTQ+ communities.
1. Workforce Inclusion:
• Tax incentives for companies
promoting gender neutrality in leadership roles.
• Enhanced funding for vocational training in traditionally male-dominated sectors like construction and manufacturing and avoiding female centric decision-making
2. Financial Independence:
• Expansion of credit facilities
like Mudra Yojana to include a gender-neutral framework.
• Subsidized loans for start-ups led
by women entrepreneurs.
3. Access to Healthcare:
• Increased allocation for
reproductive health and mental health programs across genders.
• Expansion of gender-neutral
insurance policies.
4. Education for All:
• Scholarships and STEM initiatives should target young women and other underrepresented groups.
• Promoting awareness campaigns to
address gender stereotypes in rural areas.
India has emerged as a global Startup hub, with over 108 unicorns as of 2024. However, start-ups face challenges like regulatory hurdles, limited funding access, and skill gaps in the workforce.
1. Regulatory Reforms:
• Simplifying compliance norms for
start-ups, particularly in GST and labour laws.
• Introducing a single-window
clearance system for easier business registrations.
2. Funding Support:
• Increasing the Fund of Funds for
Start-ups (FFS) corpus to support seed and early-stage start-ups.
• Extending tax exemptions on ESOPs
to attract and retain talent.
3. Skill Development:
• Scaling up initiatives under PM Kaushal Vikas Yojana, with a focus on AI, blockchain, and green technologies.
• Introducing mentorship programs
for young entrepreneurs.
4. Youth Entrepreneurship:
• Offering micro-loans for young
entrepreneurs through government-backed credit schemes.
• Incentivizing rural entrepreneurship with targeted funding for agritech and renewable energy ventures.
Conclusion: Need for a Balanced and Visionary Budget
Budget 2025 is not merely a
financial statement; it is an opportunity to define India’s future. By focusing
on income tax relief, strategic capital expenditure, gender-neutral policies,
and youth empowerment, the government can lay the foundation for sustainable,
inclusive growth.
India’s economic resilience, coupled with bold reforms, has created a unique window for transformational change. With a focus on equity, innovation, and fiscal prudence, Budget 2025 can serve as a blueprint for a $5 trillion economy, empowering every citizen to contribute to and benefit from the nation’s growth story.
