Focus to be on growth in this Budget?
According to the Bureau sources familiar with the discussions, the Prime Minister highlighted employment generation as a central focus of government policy. He also stressed the importance of enhancing data quality for better policy outcomes. “He heard everyone very patiently,” an economist present at the meeting stated.
Also Read: Budget 2025 may take a conservative path, peg nominal growth at 9.5%
An official statement later revealed that Modi emphasised the vision of ‘Viksit Bharat,’ underlining the need for a transformative mindset to make India a developed nation by 2047.
The meeting, themed “Maintaining India’s Growth Momentum at a Time of Global Uncertainty,” saw economists share their views on addressing global economic challenges and geopolitical tensions. They proposed strategies to create sustainable job opportunities, particularly for youth, and align education and training with evolving market needs. Prominent attendees included economists such as Surjit S. Bhalla, Ashok Gulati, Sudipto Mundle, and others who deliberated on actionable solutions for sustainable development.Also Read: Budget 2025 expectations: Old tax regime continuation, capital gains tax simplification, reliefs on NPS, crypto, and more: Here’s what experts want
Weak consumption, inflation woes ahead of Budget 2025
Weak consumption and stubborn inflation remain key concerns ahead of Budget 2025. India’s domestic consumption has not kept pace with the actual growth.
Recently, India’s economy grew at its slowest pace in almost two years, dampening the outlook for the full year. Gross domestic product grew 5.4% in the three months to September from a year earlier, the Statistics Ministry said in a statement. That’s the worst reading since the fourth quarter of 2022 and much lower than the central bank’s projection of 7% for the period.
In addition, higher inflation has strained household budgets, reducing disposable income and curtailing discretionary spending.
India’s inflation in November was well over the RBI’s medium-term target of 4%.
If inflation is allowed to run unchecked, it can undermine the prospects of the real economy, especially industry and exports, the RBI said.
High prices are the cause for demand slowdown in India, and aligning inflation to the central bank’s 4% target is key to ensuring sustained economic growth, minutes of the RBI’s latest policy meeting showed.
To counter weak consumption, targeted measures such as direct benefit transfers to vulnerable sections, increasing public expenditure in rural areas, and incentivising job creation in non-agricultural sectors could provide a support.
Additionally, tax relief for lower-income groups could boost spending power and revive demand in critical segments.
A sustained inflation could also erode purchasing power and impact consumer confidence. The industrial bodies have urged policymakers to focus on supply-side interventions to ease input costs and ensure adequate availability of essential commodities.
Managing inflation without disrupting growth will be critical as the government is required to balance fiscal priorities in the upcoming budget.
Income Tax reforms in the Budget 2024
In the 2024-25 Union Budget, Finance Minister Nirmala Sitharaman announced significant changes to the income tax regime. Key highlights included:
1. Relaxation of income tax slabs for earnings up to Rs 10 lakh.
2. Increase in the standard deduction for salaried and pensioners from Rs 50,000 to Rs 75,000.
3. Enhancement of the standard deduction for family pensioners from Rs 15,000 to Rs 25,000.
4. Increase in the employer’s NPS contribution deduction for private sector employees from 10% to 14%.
Industry’s wishlist for Budget 2025
India Inc, represented by industry bodies such as CII, FICCI, and PHDCCI, presented their proposals during pre-budget consultations. Their recommendations included:
- Tax reforms and simplification:
Industry bodies called for comprehensive tax reforms, rationalisation of the capital gains tax regime, and streamlined compliance procedures. They also urged for a reduction in TDS provisions and a dedicated dispute resolution mechanism.
- Goods and Services Tax (GST):
CII proposed the introduction of GST 2.0 with a three-rate structure and the inclusion of all expenses under the input tax credit chain. PHDCCI sought reduced tax rates for partnership and LLP firms, elimination of the dividend distribution tax, and relief in share buyback taxation. They recommended treating buybacks as capital gains and allowing deductions for the cost of shares.
- Customs and Indirect taxes:
Suggestions included a single certificate of origin for multiple bills of entry, simplified appeal processes, and zero customs duty for critical raw materials.
As Budget 2025 approaches, the government faces the dual challenge of sustaining economic growth and addressing global uncertainties.