The Union Budget 2025 will be presented by Finance Minister Nirmala Sitharaman on February 1st, her eighth budget presentation to date. Before that, Chief Economic Advisor V. Anantha Nageswaran and his colleagues will present the 2024–25 Economic Survey to Parliament on Friday. The study will establish the foundation for the fiscal measures specified in the next budget and offer important insights into the status of the economy.
Overcoming Economic Obstacles: The Union Budget's Path Forward 2025–2026
Bengaluru: The Union Budget 2025–2026 is being presented against a difficult backdrop as the Indian economy struggles with a downturn brought on by declining urban spending, rising inflation, and growing unemployment. India is also falling behind in the competition for cutting-edge technology, such as artificial intelligence, and the future is made more difficult by geopolitical uncertainties, notably those pertaining to US President Donald Trump’s trade and tariff policies. The goal of Finance Minister Nirmala Sitharaman and her staff is to complete the Union Budget for the upcoming fiscal year in spite of this tough economic environment.
Urban Middle-Class Tax Relief: A Transition to a Progressive Income Tax System?
Sitharaman will need to reduce the tax burden of a disenchanted urban middle class, which fuels demand for consumption, according to economists. According to experts, the budget might implement a “progressive” income tax system.
The Argument in Favor of Inclusive Income Tax Cuts to Encourage Spending
Income tax reduction must be taken into consideration in order to boost consumption. But the lower income tax brackets shouldn’t be the only ones to receive these reductions. In an interview with DH, Madan Sabnavis, Chief Economist of Bank of Baroda, emphasized that there is a compelling argument for providing relief to all income levels, particularly the “middle” middle class, which is defined as individuals who make between Rs 10 and Rs 30 lakh a year. Sabnavis claims that this market is suffering from pent-up demand and that it could greatly increase economic growth and consumption if it were given tax breaks.
Tax Relief for the Salaried Class: Increasing Spending Despite Economic Stress
The Union Budget 2025’s tax reductions for the salaried class may provide much-needed respite and increase spending. The paid workforce is experiencing a growing financial strain as a result of rising costs outpacing income growth, increased unemployment, and fewer prospects for career advancement. Any tax burden decrease in this situation could ease some of the strain, increasing people’s disposable income and allowing them to spend more, which could boost the economy.
Union Budget 2025: Key Sectors Affected by the Economic Slowdown
Concerns about the continuous downturn in urban consumption, which is hurting their profit margins, have been voiced by top executives from sectors like real estate, FMCG, and the automobile industry. With India’s GDP growth predicted to decline to 6.4% in the fiscal year 2024–2025—the weakest rate of rise since the Covid-19 pandemic—the most recent official data amply reflects this trend. In light of this, recovering growth momentum and tackling the issues affecting these industries depend heavily on the Union Budget 2025.
Union Budget 2025: Improving Consumption and Tax Compliance
Economic experts have outlined important tactics to increase tax compliance and boost consumption in front of the Union Budget 2025. One possible strategy is to streamline the tax structure by transferring all taxpayers to the new tax regime, according to Soumya Kanti Ghosh, Chief Economic Advisor of the State Bank of India and a member of the Sixteenth Finance Commission. According to Ghosh, this action might increase people’s disposable income, which would raise economic consumption levels. Although there would be a slight decrease in tax revenue as a result, the wider advantages of better compliance and higher consumer spending might offset the expenses. In the long run, this change may improve the economy’s growth trajectory and support long-term budgetary stability.
Union Budget 2025: Principal Aims and Priorities
It is anticipated that the Union Budget for 2025 will include important adjustments and reforms meant to fortify India’s economic structure. In order to streamline the nation’s tax system and increase compliance, analysts anticipate that Finance Minister Nirmala Sitharaman would propose a new tax code. In addition, the government is probably going to keep up its commitment to fiscal consolidation, which strikes a balance between budgetary prudence and growth. It is projected that infrastructure development will continue to be a top priority, with more funds going toward energy, digital, and transportation infrastructure. Additionally, we anticipate an increase in funding for the Modi administration’s major programs, including housing, healthcare, and rural development.