What does Budget 2025 mean to your money

For the past few quarters, the urban consumer has not spent enough. If you listen to company management that rides on the money we spend, they have produced a below-par performance.
Image used for representaional purpose.
Image used for representaional purpose.Express Illustrations.
Updated on
3 min read

The Union Budget 2025 presents an excellent opportunity for you. It is a wonderful time to review your finances and make a projection for the year ahead. That is similar to the announcement Finance Minister Nirmala Sitharaman made on Saturday.

She presented an income and expenditure statement for the year gone by. She also touched upon estimates for the financial year ahead. She demonstrated an action plan to plug economic gaps and take relevant measures to stimulate growth. Her team worked to allocate resources based on the global and domestic macroeconomic picture.

Two markets react immediately to the Budget. While equity markets reacted benignly to the finance minister’s speech, bond markets were shut on Saturday. Both markets want the government to be fiscally prudent and manage the government borrowing programme efficiently so that there is money in the banking system for businesses to stimulate growth. Analysts’ reactions to the credibility of the government data were positive.

That means the government may have just ticked the right boxes. Overall, the Budget anticipates pressure on growth and outlines risks due to geo-politics in 2025-26. There are two ways the Budget affects you. First is as a taxpayer and saver, and second, as an investor.

For the taxpayer and saver in you

For the past few quarters, the urban consumer has not spent enough. If you listen to company management that rides on the money we spend, they have produced a below-par performance. The solution to low consumption is to put more money in the hands of the spending class.

The new government’s first year is a good time to please the middle class in India. It was mentioned in The New Indian Express on Sunday that there were barely seven taxpayers for every 100 voters in India. While the urban middle class drives consumption, it does not matter much to politicians as we head into primary, provincial and general elections.

As a salaried urban individual or a tax-paying professional, you can strengthen your finances with the tax relief you are getting. You can start building your emergency fund that you kept putting off or restart that systematic investment plan you discontinued due to money-related issues. The government ideally would like you to spend that money.

The primary reason is that it would stimulate economic activity and generate demand. Remember, the government will collect indirect taxes like the Goods and Services Tax on the money you spend. So, it will receive some cashback instantly for the over R1,00,000 crore it is sacrificing to provide you tax relief.

For the investor in you

The year ahead could witness a surge in the US dollar. Tariffs imposed by the US on countries like China, Mexico and Canada would push US bond yields up as inflation rises. US growth is also likely to slow if there is a prolonged trade war. All that means foreign investors would stay invested in haven assets denominated in the US dollars. Indian equities could continue to see a selloff despite good macroeconomic fundamentals.

As an investor, you are presented with a unique opportunity. India’s government is looking to keep its finances healthy. The Reserve Bank of India would likely cut borrowing rates to stimulate economic activity further. That could have a positive impact on corporate profitability in the year ahead.

The government is increasingly pushing you to choose the new tax regime. The idea is to choose your investment and insurance options based on your financial goals and not by tax-saving ideas. You should buy insurance to protect life, health, and property and not to save taxes. Your financial planning deserves a credible approach to ensure a better financial future.

RAJAS KELKAR

(The author is editor-in-chief at www.moneyminute.in)

Related Stories

No stories found.

X
The New Indian Express
www.newindianexpress.com