Budget 2025 Makes a Realistic and Bold Move to Lift Sagging Demand

The biggest positive of Budget 2025 is the reduction of taxes for the middle class

- VISHAL KAMPANI

Finance minister Nirmala Sitharaman has delivered a realistic and positive punch to keep the economy progressing, especially with a strong push to boost urban consumption, at a very crucial time of challenges globally and domestically. The biggest positive of Budget 2025 is the reduction of taxes for the middle class, which leaves more money in their hands to spend.

Interestingly, this has been done: (1) without compromising on fiscal prudence with FY25 and FY26 fiscal deficit of 4.4% (4.5% earlier) and 4.8% (4.9% earlier) respectively and (2) with continuity on capex growth at 7% in FY25E and 10% in FY26E. The only question one can possibly ask is, would a slightly higher capex and a slightly higher fiscal deficit have been better? But one wonders if the government is nudging Reserve Bank of India (RBI) to cut rates by keeping the fiscal deficit in check.

The fiscal deficit target was brought down by 40 basis points to 4.4% of gross domestic product (GDP) when geopolitical headwinds, global uncertainties, depreciating rupee, slowdown in domestic growth, weak urban consumption, and sluggish private sector investment are posing some tough challenges.