UNION BUDGET 2025

Tax relief expectations soar as FM Nirmala Sitharaman set to present 8th budget

 New Delhi: Anticipation is high for potential adjustments in income tax rates or slabs as Finance Minister Nirmala Sitharaman presents her eighth consecutive Budget. The middle class, grappling with high inflation and stagnant wages, is expecting relief in the Union Budget for the financial year beginning April 1.

While the Budget is likely to introduce measures to stimulate economic growth, it is expected to maintain fiscal discipline. A major focus will be on boosting consumption while ensuring the fiscal deficit continues on its downward trajectory.

Expectations for tax relief, particularly for the lower middle class, have been heightened after Prime Minister Narendra Modi referred to the role of the goddess of wealth in uplifting the poor and middle class. "I pray to Goddess Lakshmi that the poor and the middle-class sections in the country are blessed by her," Modi stated on Friday before the Budget session commenced.

This will be the government's first full-year budget in its third term, set against a backdrop of global economic uncertainty and a slowdown in India's growth rate to a four-year low. The global trade environment remains challenging, with US President Donald Trump warning of potential tariffs on countries, including India.

Analysts foresee a mix of tax rationalisation, an export push, and enhanced implementation of capital expenditure plans. They also expect a well-defined roadmap for structural reforms, an expansion of production-linked incentive schemes, and increased funding for welfare initiatives, alongside a sustained focus on infrastructure development.

Additionally, tariff reductions aimed at strengthening local manufacturing are anticipated. Measures to boost employment and skill development, lower customs duties on intermediary goods, and higher investments in agriculture are also being closely watched. Strategies to accelerate domestic demand and private consumption are likely to feature prominently in the Budget.

Despite these spending priorities, experts believe the government will adhere to its fiscal consolidation path, targeting a fiscal deficit of 4.5 per cent of GDP for FY26 (April 2025 to March 2026), down from 4.8 per cent in the current fiscal year.

Rumki Majumdar, Economist at Deloitte India, highlighted the importance of domestic consumption and investment activity in driving growth. "We expect these two to be the fundamental growth pillars as global uncertainties weigh on net exports," she noted.

"With the conclusion of the Indian elections, we anticipate that government spending will pick up, supporting growth in the coming quarters of FY2025," she added. The government is also expected to prioritise skill development and employment generation while introducing long-term measures to strengthen the agricultural value chain, incentivise production, and tackle supply-side challenges contributing to inflation.

The global trade scenario remains uncertain, particularly after the US elections, with the possibility of increased import tariffs and tax reductions aimed at bolstering American manufacturing. "Following the US elections, the risk of volatility in global trade has increased, with potential measures, such as higher import tariffs and tax cuts to promote manufacturing in the US," she explained.

In response, the Indian government may introduce tariff rationalisation, duty exemptions, and remission schemes to enhance the competitiveness of Indian exports. Simplifying export compliance processes to improve efficiency is also expected to be a priority.

EY has projected a capital expenditure increase of at least 20 per cent to stimulate economic activity, particularly in manufacturing and infrastructure. DK Srivastava, Chief Policy Advisor at EY India, stressed the need for a balanced approach. "As we navigate a challenging economic landscape, the upcoming budget must balance fiscal prudence with growth-oriented measures.

"Increasing capital expenditure and putting more disposable income in the hands of consumers, particularly urban consumers, will be pivotal to uplifting growth in domestic demand," he stated.

While global economic conditions and fluctuations in the Indian rupee pose challenges, experts believe the Budget will introduce measures to sustain India's growth trajectory. Revising tariff structures to promote domestic manufacturing, reducing reliance on imports, and stabilising the exchange rate are likely strategies.

Infrastructure investment has played a crucial role in India's recent economic growth, even though the Rs 11.11 lakh crore allocation for the current fiscal year is expected to fall short by nearly 20 per cent.

Radhika Rao, Senior Economist at DBS, emphasised the importance of fiscal stability. "We expect the central government to prioritise macro stability by sticking with the fiscal consolidation path and steer clear of populist measures," she remarked.

This approach will help contain additional expenditures and mitigate inflationary pressures. Instead, the government may refine existing policies to support medium-term economic growth.

The Budget is being presented amid slowing domestic consumption and economic activity, which are expected to be key areas of focus. Announcements related to employment generation, skill development, and income growth are anticipated, along with measures to support labour-intensive sectors and attract private-sector investments.

With rising geopolitical tensions, the government is also expected to adopt strategies to safeguard India's economic interests in the global landscape.
(With PTI Inputs)