Union Finance Minister Nirmala Sitharaman upon her arrival at the Parliament House complex to present the 'Union Budget 2025-26.
Union Finance Minister Nirmala Sitharaman upon her arrival at the Parliament House complex to present the 'Union Budget 2025-26.Photo | PTI

Big tax-cut stimulus, prudent reforms can spur new-age growth

India’s middle class deserves this break, after many seasons of tough living. Hard-nosed economists, though, are concerned that the amount of money which should have been available for capital expenditure may slide backwards.
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A day before the Budget, the Prime Minister had flashed a tantalising trailer of the coming bounty by saying he had prayed for Goddess Lakshmi to bless the middle class. When Finance Minister Nirmala Sitharaman finally unwrapped the gift box at the very end of her budget speech, it fully justified the mounting excitement among the likely beneficiaries. As many as one crore taxpayers have been released from India’s income tax net, with exemption limits yanked up from those earning Rs 7 lakh a year to cover everyone with annual incomes of up to Rs 12.75 lakh—a full one-third of the current base.

The government had sensed it had to put more money in middle-class pockets if flagging consumption had to be cranked up. One clear stimulus to growth lay right there in firing up demand down the line, persuading industry to crank up production, with all the expected cascading effects. The government has foregone Rs 1 lakh crore to enable this, a substantial 8.65 percent of its income tax revenues. Just like ordinary salaried people have been left with more to spend, businesses, too, will have more money as bank credit flow to micro and small units and start-ups has been effectively doubled. It’s a good gambit, and the government is hoping the economy will speed up from the current gait of 6.2-6.5 percent GDP growth, more an amble than a gallop.

Union Finance Minister Nirmala Sitharaman upon her arrival at the Parliament House complex to present the 'Union Budget 2025-26.
Budget 2025: Neither a halwa, nor a biryani

India’s middle class deserves this break, after many seasons of tough living. Hard-nosed economists, though, are concerned that the amount of money which should have been available for capital expenditure may slide backwards. On the other hand, it is a qualified positive that the Budget has gone on the front foot to develop nuclear power as an alternative, faster route to becoming a ‘green energy’ nation. Qualified, of course, with safety and public health affixed as absolute imperatives. The launch of the Nuclear Energy Mission, with a Rs 20,000-crore commitment, hopes to raise nuclear power generation from a meagre 8 GW to 100 GW by 2047. Walking down the same path, the Budget has exempted a slew of critical minerals and electric vehicle parts from customs duty to make EVs cheaper and more popular.

The palette was also shaded with some tones of disappointment. Some came from the capital markets: initially rising briskly in anticipation of bold measures, they slid into the red at the absence of direct spurs, and finally ended flat. A larger realism perhaps underlays this. Gathering apace is a sense that a fuller reckoning was warranted of the backdrop of global headwinds, what with the protectionist storm unleashed by the new Trump administration. The Economic Survey has warned of the GDP graph hugging the 6.3-6.5 percent plateau. The challenge posed by China, which seems rather more nimbly adjusted to the demands of the day, should goad India into deeper reforms. We are not going to catch up with education, health and nutrition lagging—the collective outlay for the social sector has thinned to 23 percent, a 4 percent drop from the previous year.

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