India’s budget promises growth with inclusivity
- 02 Feb 2025
India’s Union Finance Minister Nirmala Sitharaman presenting the Budget for 2025-2026 had revealed the roadmap for India to become a developed country by 2047 when it would celebrate its 100 years of independence. She said, “...Viksit Bharat (developed India) encompasses a) zero-poverty, b) hundred per cent good quality school education, c) access to high quality, affordable, and accessible health-care, d) hundred per cent skilled labour with meaningful employment, e) seventy per cent women in economic activities; and f) farmers making our country the ‘food basket of the world’.” She said that in spite of the fact that global economic growth has been slow, India is determined to pursue the centenary goal.
She had announced several measures of financial support for the various sectors ranging from agriculture to manufacturing to urban development to increase productivity. She has also announced many incentives in all these sectors where government, banks and public-private partnerships would help micro, small and medium enterprises (MSEs) to create more employment and increase productivity, especially for purposes of exports.
She revised the definition of MSMEs at each level – micro, small, medium – to enable their access to credit. There have also been announcements for the Artificial Intelligence (AI) sector through import concessions for critical mineral components. At the same time, she had increased import duties in electronics to help strengthen domestic manufacturers.
There is good news for taxpayers, especially the middle class. She has exempted tax for those earning Rs.1.2 million per annum, which is US$13, 841.25. It translates to those earning US$1,000 a month. This is good news for many in the lower middle class group. The tax rates for other income brackets too have been revised, with those earning US$26,000 liable to pay 30 per cent tax. This translates to those earning US$2,000 and more per month.
And she has increased the remittance exemption from tax to Rs10 lakh or US$8,000. Despite the tax and import concessions, the finance minister has said that declining path of government debt to GDP will continue. She said that the fiscal deficit is estimated to be 4.8 per cent in 2025, and that it will be 4.4 per cent in 2026.
The finance minister faced the customary criticism from the main opposition party, the Congress. Former finance minister P.Chidambaram of the Congress said that the government does not have the resources to implement the ambitious schemes it has announced to accelerate economic growth of the country, and he said that it is not clear whether the government would be able to meet its estimated fiscal deficit target of 4.8 per cent.
The famers’ lobby had expressed its disappointment that the finance minister had nothing to say about legislation on the issue of Minimum Support Price (MSP), the price at which government procured food grains from the farmers. The Economic Survey which the government had released on Friday, a day before the Budget, has pointed to the fact that India needs to attract investments, and it has to be mainly from domestic sources because of the global uncertainties. Sitharaman had acknowledged the global political uncertainties, but she expressed confidence that government hopes to keep the growth momentum – India has been the fastest growing among the major economies – going through the Budget announcements she has made.
The ‘headwinds’ to global economic growth because of the slowdown in the European zone and the uncertainties arising from US President Donald Trump’s economic policies are indeed weighing heavy, but India has managed to keep its growth rate going. The Modi government believes that India has the potential to overcome the economic odds through right policies.
