Morning Mint: Weekly edition
Sunday, February 2, 2025
Union Budget 2025: Key Highlights and Implications
Finance Minister Nirmala Sitharaman presented the Union Budget for 2025-26 yesterday on February 1st, introducing several measures aimed at stimulating economic growth and providing relief to various segments of the population.
Income Tax Reforms
- Increased Tax Exemption Limit: The government has raised the non-taxable income threshold from ₹7 lakh to ₹12.8 lakh per annum. This move is expected to boost disposable income for the middle class, encouraging higher consumer spending.
- Reduced Tax Rates: For individuals earning above ₹12.8 lakh, tax rates have been lowered. These changes are projected to result in a revenue loss of approximately ₹1 trillion for the government.
Fiscal Deficit and Borrowing
- Fiscal Deficit Target: The government aims to reduce the fiscal deficit to 4.4% of GDP in 2025-26, down from the revised 4.8% in the current year.
- Borrowing Plan: To fund the deficit, the government plans to borrow ₹14.82 trillion through bonds.
Capital Expenditure
- Modest Increase: Capital spending is set to rise to ₹11.21 lakh crore in 2025-26 from ₹10.18 lakh crore in the current year. This increase focuses on infrastructure projects, aiming to stimulate private investment and economic activity.
Support for Key Sectors
- Agriculture: A national mission will be launched to promote high-yielding crops, with a special focus on pulses and cotton. Additionally, the limit for subsidized credit to farmers has been increased to ₹5 lakh from the previous ₹3 lakh.
- Manufacturing and Exports: Initiatives to boost manufacturing and exports are on the agenda, though specific details are awaited. The government also plans to raise the Foreign Direct Investment (FDI) limit in the insurance sector to 100% from the current 74%, aiming to deepen insurance penetration in the economy.
Implications for the Indian Economy and Citizens
- Economic Growth: The tax reforms are expected to enhance middle-class spending power, potentially stimulating demand in various sectors.
- Private Investment: The modest increase in capital expenditure, coupled with efforts to reduce the fiscal deficit, may create a conducive environment for private investments.
- Agricultural Productivity: Focused support for high-yielding crops and increased credit limits aim to boost agricultural output and farmer incomes.
- Insurance Sector: Raising the FDI limit could attract more foreign investment, leading to greater competition and potentially better insurance products for consumers.
Overall, the budget seeks to balance fiscal prudence with growth-oriented measures, aiming to foster sustainable economic development and improve the standard of living for Indian citizens.
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-Team Market Mint
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