February 1, 2025

The Union Budget of this year has been a boon for the middle class, specially the salaried class, which felt a wee bit overlooked over the years. Despite the fact, that with about 10 million taxpayers out of a total of 30 million, getting off the tax net, shaving 1 trillion INR off the Indian exchequer’s reserve, the FM has still managed to pare the Fiscal Deficit for the coming fiscal to 4.4% from the RE for the present fiscal of around 4.8%. The basic ingredients behind this fine balancing act are a toned down Capex of Rs 11.2 Lakh crore (1% increase over last fiscal budget), albeit including Grants-in-aid to States, Rs 15 lakh crore; an estimated 14.4% rise in personal income tax from Rs 12.6 lakh crore to Rs 14.4 lakh crore, next fiscal; Corporation tax and GST growth expected to grow by 10%; growth in revenue from Dividend income and profits from PSEs from Rs 2.9 lakh crore to Rs 3.3 lakh crore in FY 25. As such, the economy is well poised on the fiscal consolidation path to keeping the target below the threshold of 4.5% of GDP, as outlined in the Budget 2021. Along with the above, the Budget enjoins the Government to seek to bring down the ‘Debt to GDP’ to about 50% by the end of FY31 (End of the 16th Finance Commission’s term) from 56.1%, projected for FY 26. By the calculations of a few economists, this would dovetail well with a Fiscal Deficit of 3 to 3.3%, coupled with a capex of 3 to 3.5% of GDP. This is the outcome of an admixture of fiscal prudence and development measures undertaken by the Government (with an added dose of infra), that would lay down the edifice of a resilient and growing economy duly buttressed by fiscal buffers, ever ready to face the global and other economic headwinds, going forward. The major takeaway for the salaried class translates to a tax free salary income of up to Rs 12.75 lakh, rebate on annual income up to Rs 12 lakh, as against the extant limit of Rs 7 lakh. As per the rejigged tax slabs, the extent of tax savings would range from Rs 30K to Rs 1.1 lakh, with the highest tax rate being applicable to income above Rs 24 lakh vis-a-vis Rs 15 lakh, at present. Government’s emphasis on revamping the sagging demand growth by strengthening the purchasing power of the middle class is amply borne out by this budget, as also keeping a hawk eye on the Indian economy’s trajectory to a ‘Viksit Bharat” by way of sumptuous allocation of funds to the major sectors like Defence (Rs 4.91 trillion), Rural Development (Rs 2.66 trillion), Agriculture & Allied activities (Rs 1.71 trillion), Education (Rs 1.28 trillion), Health (Rs 98.3 K), Urban Development (Rs 96.7 K), IT & Telecom (Rs 95.2 K), and the list goes on. The Budget FY 25 revolves around 4 major planks of development, viz., Agriculture, Investment, MSME and Exports. Taking cognizance of the dominance of AI, going forward, the Government has come out with an outlay of Rs 500 Crore on the Centres of Excellence in AI for education. Further, the Udan Scheme has been given a fillip to cover 120 new destinations; Jan Vishwas Bill would be introduced to decriminalise 100 provisions in various statutes; FDI limit for insurance increased to 100% from the extant 74%. That said, there are certain facts of concern which engages the Union Government, like a gradual economic slowdown, a markdown in the RE of many crucial economic parameters like Disinvestment, Capex, Corporation tax and Excise duties, to name a few. No wonder, the FM’s stress in the Budget on upliftment of rural economy, MSMEs, boost to investment with Private sector taking a big stride with Government creating an enabling environment and boosting exports to arrest a slide in the balance of trade. Although the Government’s efforts in keeping the overall inflation in check through fiscal and monetary measures cannot be overlooked, yet the food inflation horse needs to be reined in to preempt a gallop – hence the imminent need for that fillip to production with a matching consumer demand! The Budget 2025, therefore, amply deserves to be appreciated, for nothing less than it being a brilliant trapeze act, encapsulating courage, conviction, optimism and astuteness.