On February 1, 2025, Finance Minister Nirmala Sitharaman presented India’s Union Budget for fiscal year 2025-26.
It will describing the government’s financial strategy in the face of global economic uncertainty and internal concerns.
Subsidies and Social welfare
The government intends to raise spending on necessary subsidies by 8%, allocating about $47.41 billion. This encompasses:
Food Subsidies
An estimated 2.15 trillion rupees to cover increasing rice procurement and storage expenses.
Fertilizer Subsidy
The fertilizer subsidy has been maintained at 1.7 trillion rupees to help farmers manage growing input costs.
Cooking Gas Subsidy
Approximately 250 billion rupees, more than double from the previous fiscal year, to reduce home energy costs.
Tax Reforms
The budget offers the following measures to help the middle class and increase consumption:
Income Tax Adjustments: Consideration of tax reduction for persons earning up to 1.5 million rupees each year.
Tax Regime Debate: There are ongoing discussions between the old and new tax regimes.
With the new regime allowing a higher standard deduction of 75,000 rupees for salaried individuals, compared to 50,000 rupees under the old regime.
Disinvestment and Fiscal targets
The government is anticipated to cut its disinvestment and asset monetization.
objective by 40% for fiscal year 2024-25, bringing it down to less than 300 billion rupees from the initial 500 billion.
This modification acknowledges obstacles in the sale of state-owned enterprises and seeks to set more attainable goals.
Capital Expenditure and Infrastructure development
A record 11.11 trillion rupees is set aside for capital investment.
With a focus on infrastructure and technology development, notably in regions such as Bihar and Andhra Pradesh.
The Reserve Bank of India has transferred 2.1 trillion rupees to fund this effort, which aims to improve rural development and employment creation.
Market borrowing and Fiscal deficit
The government has decreased the amount of money it plans to borrow from the market.
For the financial year until March 2025 to 14.01 trillion rupees, which is less than the initial amount of 14.13 trillion rupees.
Also, the target for the fiscal deficit has been reduced to 4.9% of GDP, down from 5.1%,
showing a dedication to improving fiscal strength.
Industry reactions
The budget has received positive feedback from different industries.
MSMEs and Startups
Small and medium-sized businesses and new companies appreciate the credit guarantee schemes and the elimination of the angel tax.
These measures help make businesses more competitive and encourage innovation.
Infrastructure and Housing
Applause was given for the attention to improving infrastructure and housing in both rural and urban areas.
It is believed that the increase in funding will help boost demand in the housing market.
Capital market
Capital markets are being affected by higher taxes on capital gains and increased securities transaction tax.
Experts believe that these measures will help reduce market volatility and promote steady growth in the long run.
Conclusion
The 2025 Union Budget shows how the government is trying to be careful with spending while also trying to boost the economy.
It plans to give
- more subsidies,
- change how taxes are collected,
- put money into building infrastructure
to help with current issues and set the stage for lasting growth.
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