Finance Minister Nirmala Sitharaman is set to present the first full Union Budget of Prime Minister Narendra Modi’s third term today. This marks her record eighth consecutive Budget, nearing the milestone of 10 Budgets presented by Morarji Desai at different times.
Here are 10 key points to watch:
- Budget Amid Global Uncertainties
Ms. Sitharaman will present the Union Budget 2025 against the backdrop of geopolitical tensions and a slowing economic growth rate, which has hit a four-year low. Additionally, newly elected US President Donald Trump’s tariff threats add to economic uncertainties. The Budget speech will commence at 11 AM. - Tax Relief Expectations for the Middle Class
There is widespread anticipation of tax cuts, especially for the lower middle class, after PM Modi invoked Goddess Lakshmi for economic prosperity. He emphasized uplifting the poor and middle class, fueling hopes of a reduction in income tax rates and an increase in the standard deduction. - Potential Income Tax Concessions
Middle-class taxpayers are expecting relief, with possible reductions in tax rates and a higher standard deduction. Under the old tax regime, the basic exemption limit is ₹2.5 lakh, while under the new regime, it is ₹3 lakh. The Budget may bring changes in these thresholds. - Boost to Financial Inclusion
The Economic Survey emphasized financial inclusion for rural households and small businesses. The Budget may introduce measures to enhance credit access through microfinance institutions, self-help groups, and other intermediaries. - Massive Infrastructure Push
A significant increase in infrastructure investment is expected over the next decade to meet India’s development goals. Current spending needs to be scaled up, and Ms. Sitharaman is likely to announce major infrastructure initiatives to bridge the funding gap. - Revised Tariff Structures for Domestic Manufacturing
The government may revisit tariff structures to promote domestic manufacturing, reduce import dependency, and manage exchange rate fluctuations. Infrastructure spending has been a key growth driver, though the current fiscal’s ₹11.11 lakh crore allocation is expected to fall short by 20%. - Focus on Artificial Intelligence (AI)
With AI becoming a critical global priority, Ms. Sitharaman is expected to announce policies to accelerate AI adoption in India. Recent discussions at the World Economic Forum in Davos highlighted the global AI race, particularly with China’s DeepSeek model setting new benchmarks. - Tariff Reforms and Manufacturing Incentives
The Budget is expected to introduce tariff reforms and a concessionary tax rate for new manufacturing units. While lower tariffs could reduce costs for manufacturers reliant on imported components, they might also challenge protected domestic industries. - Corporate Tax Relief in Response to US Policies
With President Trump proposing lower corporate taxes in the US, India may feel the pressure to keep its corporate tax rates competitive. In 2019, India cut its corporate tax rate from 30% to 22% to attract investment, but analysts argue this move mainly boosted corporate profits rather than spurring job creation. - Continued Fiscal Consolidation
The government is expected to stay committed to fiscal consolidation. The fiscal deficit is projected to decline to 4.5% of GDP for FY 2026, compared to 4.8% in the current fiscal year ending March 31.
The Union Budget 2025 will play a crucial role in shaping India’s economic trajectory amid evolving global challenges.