Finance Minister Nirmala Sitharaman
“We have heard the voice of middle class” who had been complaining about their aspirations not being met despite being honest taxpayers, Sitharaman said in an interview with news agency
New Delhi: It is a very positive and growth oriented budget. There are many reforms which will contribute to ease of doing business and faster economic growth.
To deepen the penetration of insurance in the economy, the foreign direct investment limit on insurance was raised to 100% from 74% currently.
Paraphrasing Abraham Lincoln, Finance Minister Nirmala Sitharaman on Sunday described the Union Budget as “by the people, for the people, of the people”, and said Prime Minister Narendra Modi was fully behind the idea to cut taxes but it took time to convince the bureaucrats.
“We have heard the voice of middle class” who had been complaining about their aspirations not being met despite being honest taxpayers, Sitharaman said in an interview with news agency.
She also said that during the election year 2024, the capital expenditure was a bit slow.
On Bihar and Delhi, Sitharaman said, “For want of criticism, they (Opposition) are picking this up. These are lame and lazy quick way to look at budget. Everyone gets its due grant. I want them to go through the details and then come back.”
Finance Minister Nirmala Sitharaman in the Budget 2025 announced big rebates for taxpayers in the middle-income group by making annual income up to Rs 12 lakh tax-free and allowing tax benefits for others by revamping slabs.
India slashed personal tax rates in its annual budget on Saturday, as the world’s fifth largest economy focuses on boosting domestic demand amid uncertainty over the global economic outlook due to potential new tariff barriers.
The world’s most populous country is expected to post its slowest growth in four years next year amid frail urban demand and weak private investment, while stubbornly high food inflation has dented disposable incomes.
Critics have derided the election as a sham by the junta to keep themselves in power through proxies.
The move will result in an annual 1 trillion Indian rupee ($11.6 billion) hit to Treasury revenues.
Measures to assist the poor, youth, farmers and women were also included in the budget for 2025-26, Sitharaman said.
Increasing living costs have weighed on the popularity of Prime Minister Narendra Modi, with one survey showing more Indians are becoming less hopeful about their quality of life.
Per capital income is around $2,700 for India’s population of 1.4 billion, with about one-third considered middle class.
The tax cut is “likely to spur consumer demand and savings by the middle class that has faced challenges from elevated inflation and lower income growth,” Sakshi Gupta, economist at HDFC Bank.
The move led to a rally in consumer stocks such as Maruti Suzuki, Godrej Consumer Products and Prestige Estates, which jumped by 4% to 8%.
To balance the revenue lost, the government has budgeted for a modest increase in capital spending this year, which will rise to Rs 11.21 trillion rupees in 2025-26 compared to a lowered 10.18 trillion in the current year.
The modest infrastructure spending increase disappointed investors in the sector and stocks of firms including Larsen & Toubro , NBCC , IRB Infra and KEC International were down between 1% and 6%.
The government expects to improve its finances, targeting a fiscal deficit of 4.4% of GDP in 2025-26, down from a revised 4.8% of GDP in the current year.
It will borrow 14.82 trillion Indian rupees via the bond markets to fund this year’s fiscal deficit.
The government, however, refrained from pre-empting the impact of potential tariffs from U.S. President Donald Trump on India and focussed on lowering some input costs for industries that have been raising output such as electronics and renewables.
FOCUS ON FARM, MANUFACTURING AND FINANCIAL SECTOR
India has faced a bout of high food inflation over the past year due to weather changes impacting output.
To boost productivity across the farm sector, the government will launch a national mission to push high-yielding crops, with a special focus on pulses and cotton production.
To help farmers, the limit for subsidised credit has been raised to Rs 500,000 Indian rupees ($5,778) from Rs 300,000 earlier.
The government will also launch missions to push manufacturing and exports, Sitharaman said, without going into details.
India has long aimed to boost the share of manufacturing and exports in its economy but has had little success. The share of manufacturing in the economy has remained close to 17%, short of its long-standing goal of 25%.