As India prepares for the Union Budget 2025, the Finance Ministry is expected to navigate a complex landscape of economic challenges and public expectations. The Budget Session of Parliament will run from January 31 to April 4, 2025, with Finance Minister Nirmala Sitharaman set to present her eighth budget on February 1 [48f32eed]. This session will commence with President Droupadi Murmu addressing a joint sitting of the Lok Sabha and Rajya Sabha on January 31, marking the beginning of discussions that will include nine sittings until February 13 [48f32eed].
Recent analyses suggest that significant reductions in personal income tax are unlikely, as the government remains cautious following past economic crises, including the 2008 financial meltdown and the COVID-19 pandemic [74df16a7]. Sugata Ghosh from the Economic Times notes that the ratio of personal income tax to GDP has increased since the pandemic, indicating a trend towards stricter tax policies [74df16a7]. ICRA has predicted only minor personal income tax relief, while a new income tax bill is expected to simplify existing laws [48f32eed].
Tavleen Singh has voiced concerns about the government's populist spending strategies, particularly in light of the upcoming Maharashtra elections. She criticizes the allocation of Rs 87,000 crore for welfare schemes, warning that such measures could lead to dependency and poverty [abb1ccb5]. In contrast, the government is under pressure to balance fiscal responsibility with the need for growth, especially as inflation remains a concern, having recently peaked at 8.9% [a45004b2].
Nagesh Kumar, a member of the RBI Monetary Policy Committee, has emphasized the necessity for the Union Budget 2025-26 to prioritize capital expenditure and infrastructure spending to enhance economic growth [017cf59d]. He noted the importance of sustaining infrastructure investment for robust economic growth, especially given the slight economic slowdown observed in the second quarter and the conclusion of pent-up demand following the COVID recovery [017cf59d]. The government may also cut its disinvestment target by 40% for FY25 to less than 300 billion rupees, as various industries express their expectations for the budget [48f32eed]. The steel ministry is seeking 150 billion rupees for low-carbon steel production, highlighting a push towards sustainable practices [48f32eed]. Additionally, urban demand has declined for five consecutive quarters, prompting the Federation of Indian Chambers of Commerce & Industry (FICCI) to emphasize the need for investment and reforms [48f32eed].
As GDP growth slowed to 5.4% in the July-September quarter, Raghuram Rajan has expressed concern over the impact on middle-class demand [48f32eed]. In a bid to stimulate growth, ICRA suggests targeting 11 lakh crore in capital spending for FY26, with Indian Railways potentially seeing a 15-20% increase in capital expenditure [48f32eed]. The interplay between populism, fiscal responsibility, and economic growth will be critical as the government navigates the expectations of various stakeholders while addressing pressing issues of inflation and unemployment [4eebab35].