By Nageshwar Patnaik in Bhubaneswar, February 2, 2025: Union Finance Minister Nirmala Sitharaman unveiled her eighth consecutive Union Budget on Saturday providing significant tax relief to the salaried middle class that was struggling with high prices and stagnant wages. Given the widespread discontent among the middle-class, the announcement of tax relief has been welcomed.

Ms Sitharaman said individuals having an annual income of Rs 24 lakh or more can hope to save Rs 1.10 lakh in income tax, while those earning Rs 12 lakh will have to pay no tax, benefiting to the tune of Rs 80,000 from next fiscal under the new regime. She also said the government will introduce a new Income Tax bill in Parliament next week, replacing the six-decade old income tax act of 1961.

A day prior, the Economic Survey was tabled in Parliament, which projected a growth rate of 6.3-6.8 per cent for the next financial year, stating, “Viksit Bharat@2047 envisions India as a developed nation by 2047, the centenary of our independence. This would entail sustained economic growth of close to 8 per cent every year for at least a decade.”

The Union Budget 2025-26 envisaged an expenditure of Rs 50, 65,345 crore, an increase of 7.4% over the current fiscal. The 2024-25 expenditure (Revised Estimates) is Rs 47.16 lakh crore. Capital expenditure, a tenth higher on-year, will boost demand for sectors such as steel, cement and capital goods. Raising resources through divestment could have increased money for capital expenditure. However, the government is probably constrained by its institutional capacity to spend appropriately.

The setting up of a ‘Partial Credit Enhancement Facility’ by NaBFID is supportive of capex in the infrastructure sector and the bond market development.

Continuity on the reforms front — ease of doing business, boosting employment, and upskilling for productivity — will result in a conducive environment and aid India’s long-term growth prospects. To continue improving the ease of doing business, the pace of repealing outdated laws, through the Jan Vishwas Bill proposed in the budget, must be enhanced. These outdated laws impose high compliance burden on our entrepreneurs. The Jan Vishwas Bill must find ways to unburden entrepreneurs so that they can match up to global competition.

This budget is expected to maintain positive domestic investor sentiment, encourage domestic flows to the capital market, and improve corporate profits over time.

Schemes for the MSME sector, women, farmers, the education sector, for boosting exports, etc. have also been announced. The initiatives announced aim to boost self-reliance, with an eye on Atmanirbhar Bharat.

The best part of the budget was a commitment to lower India’s debt-to-GDP ratio over the next six years. The path of fiscal prudence has laid the foundation for the monetary policy committee’s cut in the repo rate and for the RBI’s improvement in durable liquidity. Estimates for next year’s GDP growth should get a boost if fiscal and monetary policy move in tandem to be growth-oriented.

The budget has stuck to fiscal prudence by lowering the deficit this year to 4.8 per cent of GDP and next year to 4.4 per cent of GDP below expectations, boosting urban consumption through income tax cuts by giving a tax cut for income up to Rs 12 lakh and enhancing allocation for capital expenditure by 10 per cent at the central level and 17 including grants.

The budget’s focus on education — through the digitisation of school and college books, broadband availability to government schools, and tens of thousands of Atal Tinkering Labs to encourage innovation — is a step in the right direction to ensure that the country’s next generation is better educated and employable.

The budget focuses on the tourism sector and aims to develop 50 destinations and expand medical tourism. This will require public and private partnerships at various levels. Indian citizens must adopt “Swachh Bharat” and “Atithi Devo Bhava” in the true sense.

The budget has invested in the future by allocating Rs 10,000 crore for a start-up Fund of Fund scheme; Rs 25,000 crore for shipbuilding through a Maritime Development Fund; and Rs 20,000 crore for small modular nuclear reactors. All these investments are futuristic and could have a multiplier effect on the economy.

Developing the labour-intensive toys and footwear industry and the renewable energy sector through a manufacturing ecosystem and clusters of excellence will require faultless execution.

The government has chosen to focus on four ‘C’s to ensure holistic growth — consumption, capex, continuity (of existing programmes) and consolidation (of the fiscal). The income tax tweaks announced will have twin benefits of leaving more money in the hands of consumers and supporting bank deposits.

Prime Minister Narendra Modi lauded the Union Budget as a “people’s budget” that puts more money in the hands of people, and said it is a force-multiplier that will increase investments and lead to growth. “The Budget lays a strong foundation to increase savings and make citizens partners in development,” he said.