New Delhi, February 01, 2025.
Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 in Lok Sabha on Saturday, her eighth consecutive budget. As was anticipated, she offered a major relief to the middle class, announcing that those earning up to Rs 12.75 lakh in a year would not have to pay any taxes. Sitharaman also altered tax slabs for people earning above this threshold to help save up to Rs 1.1 lakh in taxes for those with income up to Rs 25 lakh in a year. The tax cuts, which will cost the exchequer about Rs 1 lakh crore, will benefit 6.3 crore people, or more than 80 per cent of taxpayers, who earn up to Rs 12 lakh a year.
“The new structure will substantially reduce taxes on the middle class and leave more money in their hands, boosting household consumption, savings and investment,” Sitharaman said presenting what was dubbed as ‘reformist’ budget for the next fiscal in Lok Sabha.
The Budget for April 2025 to March 2026 (FY26) proposed to raise the foreign investment limit in the insurance sector to 100 per cent from the current 74 per cent and continue spending spree on infrastructure while raising allocations for social sectors as well as providing for measures for poor, youth, farmers and women. All this she did while managing to stick to the fiscal consolidation roadmap, projecting a fiscal deficit of 4.4 per cent of the GDP in FY26 as against an estimated 4.8 per cent in the current year ending March 31.
“The Union Budget strikes a balance between fiscal prudence and growth, with a focus on boosting middle-class consumption, savings, and investments through direct tax measures. The commitment to higher capital expenditure at Rs 11 lakh crore, alongside a reduction in fiscal deficit to 4.4%, is a welcome move. Additionally, the budget’s emphasis and measures on the ‘engines of growth’ MSMEs, Agriculture, Investment, Exports and ease of doing business is crucial to stimulate private sector investments. While ‘accelerating growth’ remains a key focus, the balance between fiscal discipline and growth measures will be critical for sustaining India’s economic momentum.” Said Shanti Ekambaram , Deputy Managing Director, Kotak Mahindra Bank
“The boost to MSMEs, by increasing investment and turnover limits and expanding credit guarantees, is a very important step towards increasing the contribution of the manufacturing sector in our economy,” said Sajjan Jindal, JSW Group Chairman and Managing Director.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, “The Union Budget has struck the right chord balancing the fiscal prudence with supporting the slowdown in private demand. The re-emphasis on fiscal consolidation roadmap over the next few years too remains comforting for the markets.”
The Union Budget 2025 is quite balanced and directionally positive for the medium and long-term and will consolidate the growth pillars. While the core drivers remain the same as last budget; Agriculture, MSMEs, Investments and Exports, the sustained focus on Financial Inclusion (both, urban and rural), Grow in India, Make in India, ease of compliance and ease of doing business clearly support the vision to create a Viksit Bharat. The fiscal prudence, pegging the fiscal deficit for FY26 at 4.4%, lower than 4.8% for FY25 without dropping the ball on capex (with a Rs 11.21 lakh crore outlay – up 10% YoY), is equally impressive. But the big twist or the “tadka” of Rs 1 lakh cr – through the income tax rationalisation – will certainly provide a huge fillip to the lagging private consumption.”Manish Kothari, Head – Commercial Banking, Kotak Mahindra Bank
