Expectations from Budget 2025: A Roadmap for Inclusive and Sustainable Growth
The Union Budget for 2025 ispoised to be one of the most critical financial blueprints for India,particularly as the country navigates a global economic landscape riddled withuncertainties while maintaining its position as one of the fastest-growing economiesin the world. As the Indian government prepares to unveil its vision for thenext fiscal year, there are several key areas where Budget 2025 must focus,including tax reforms, capital expenditure deployment, gender inclusivity, andmeasures to boost startups and youth empowerment.
This article provides acomprehensive analysis of what to expect from Budget 2025, delving into India’seconomic resilience, the need for reforms, and strategies for creating aninclusive, innovation-driven economy.
1. India’s Economic Resilience: ASolid Foundation
Recovery Post-Pandemic
India’s economic recoverypost-pandemic has been nothing short of remarkable. Despite challenges such asglobal inflation, supply chain disruptions, and geopolitical tensions, theIndian economy has showcased resilience and adaptability. Real GDP growth hasremained robust, with estimates placing it at around 6.5% for FY 2024-25, astark contrast to the negative growth experienced during the COVID-19 pandemic.
The resilience is attributed to:
1. Strong Domestic Demand: Post-pandemicconsumption has surged, driven by rising urban and rural incomes.
2. Government Interventions: Programs like theAtmanirbhar Bharat Abhiyan provided fiscal stimulus to sectors such as MSMEs,manufacturing, and infrastructure.
3. Global Supply ChainRealignment: India emerged as a viable alternative for global manufacturers,attracting investments in electronics, pharmaceuticals, and renewable energy.
Key Economic Indicators
• InflationManagement: Inflation has been moderated to 4.7% as of December 2024, aided byefficient monetary policies by the Reserve Bank of India (RBI).
• FDI and Exports: FDI inflows havecontinued to grow, with $84 billion in FY 2023-24, while exports of services,particularly in IT and digital solutions, remain strong.
• Fiscal Consolidation: The fiscaldeficit, targeted to be 4.5% of GDP by FY 2025-26, reflects prudent fiscalmanagement, even amidst large-scale public spending.
2. Income Tax Reforms: Relief for Individuals
Historical Context
Income tax reforms havehistorically played a significant role in boosting consumer spending, acritical driver of India’s GDP. However, the middle class, which forms thebackbone of India’s economy, has often felt constrained by high taxation ratesand limited disposable income.
Budget 2025 provides anopportunity to address this issue. While previous budgets, including the one in2020, introduced a simplified new tax regime, its adoption has been lukewarmdue to the elimination of popular exemptions.
What to Expect in Budget 2025
1. Increase in Basic Exemption Limits:
The current exemption is recommended to be increased to ₹10 lakh, providing relief to lower-income groups andensuring more disposable income for the middle class.
2. Lowering Rates for the Middle Class:
Tax rates for the ₹10 lakh - ₹20 lakh brackets could be reduced further to spur consumption, which has a directmultiplier effect on the economy.
3. Enhanced Standard Deduction:
The standard deduction forsalaried individuals and pensioners could be increased to ₹1.5 lakhs to offset inflationary pressures.
4. Support for Senior Citizens:
Senior citizens could see anincrease in the exemption threshold to ₹10 lakh, recognizingtheir unique financial needs. We also have to take into consideration changing social fabric of elderly citizens - being left alone by their children
5. Incentives for Savings:
Reintroducing tax exemptions forsavings instruments like PPF, ELSS, and insurance premiums under the new taxregime could encourage a culture of savings while stimulating long-terminvestments.
3. Capital Expenditure: BuildingIndia’s Future
Historical Perspective
The government’s focus on capitalexpenditure (capex) has been a cornerstone of its growth strategy. The ₹10 lakhcrore allocation for FY 2024-25 marked a significant 33% increase over theprevious year, reflecting an unprecedented commitment to infrastructuredevelopment.
Capex spending has a multipliereffect, generating jobs, boosting industrial activity, and enhancing India’sglobal competitiveness.
Key Areas for FY 2025-26
1. Infrastructure Development:
• Completion of PM Gati Shaktiprojects, including expressways, freight corridors, and ports.
• Focus on Tier-2 and Tier-3 citiesto promote balanced urbanization.
• Expansion of metro networks incities like Indore, Jaipur, and Lucknow.
2. Renewable Energy Transition:
• Greater investment in solar andwind energy, with specific targets for green hydrogen production.
• Incentives for electric vehicle(EV) infrastructure, including charging stations and battery production.
3. Rural Development:
• Enhanced allocation for ruralinfrastructure under the Pradhan Mantri Gram Sadak Yojana.
• Investments in water supplyschemes and irrigation systems to support agricultural growth.
4. Healthcare and Education:
• Increased funding for AyushmanBharat Digital Health Mission to expand healthcare access.
• Setting up smart classrooms anddigital libraries under PM e-Vidya to revolutionize education.
5. Private Sector Participation:
• Public-private partnerships (PPPs)for infrastructure projects could be incentivized to attract private investmentand expertise.
4. Gender-Neutral Budgeting: AStep Toward Equality
Why Gender-Neutral Policies AreCrucial
Despite significant progress,gender inequality persists in India, particularly in workforce participationand access to opportunities. Historically, budgetary allocations have focusedon women-specific programs. While these efforts are commendable, a gender-neutralapproach ensures inclusivity for all genders, including men, women, and LGBTQ+communities.
Proposed Measures
1. Workforce Inclusion:
• Tax incentives for companiespromoting gender neutrality in leadership roles.
• Enhanced funding for vocationaltraining in traditionally male-dominated sectors like construction andmanufacturing and avoiding female centric decision-making
2. Financial Independence:
• Expansion of credit facilitieslike Mudra Yojana to include a gender-neutral framework.
• Subsidized loans for start-ups ledby women entrepreneurs.
3. Access to Healthcare:
• Increased allocation forreproductive health and mental health programs across genders.
• Expansion of gender-neutralinsurance policies.
4. Education for All:
• Scholarships and STEM initiativesshould target young women and other underrepresented groups.
• Promoting awareness campaigns toaddress gender stereotypes in rural areas.
5. Fostering Start-ups and YouthEmpowerment
India’s Startup Ecosystem
India has emerged as a globalStartup hub, with over 108 unicorns as of 2024. However, start-ups facechallenges like regulatory hurdles, limited funding access, and skill gaps inthe workforce.
Budget Expectations
1. Regulatory Reforms:
• Simplifying compliance norms forstart-ups, particularly in GST and labour laws.
• Introducing a single-windowclearance system for easier business registrations.
2. Funding Support:
• Increasing the Fund of Funds forStart-ups (FFS) corpus to support seed and early-stage start-ups.
• Extending tax exemptions on ESOPsto attract and retain talent.
3. Skill Development:
• Scaling up initiatives under PMKaushal Vikas Yojana, with a focus on AI, blockchain, and green technologies.
• Introducing mentorship programsfor young entrepreneurs.
4. Youth Entrepreneurship:
• Offering micro-loans for youngentrepreneurs through government-backed credit schemes.
• Incentivizing ruralentrepreneurship with targeted funding for agritech and renewable energyventures.
Conclusion: Need for a Balanced and Visionary Budget
Budget 2025 is not merely afinancial statement; it is an opportunity to define India’s future. By focusingon income tax relief, strategic capital expenditure, gender-neutral policies,and youth empowerment, the government can lay the foundation for sustainable,inclusive growth.
India’s economic resilience,coupled with bold reforms, has created a unique window for transformationalchange. With a focus on equity, innovation, and fiscal prudence, Budget 2025can serve as a blueprint for a $5 trillion economy, empowering every citizen tocontribute to and benefit from the nation’s growth story.
