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"Will Union Budget 2025 Deliver the Boost India Needs for Growth?"

Union Budget 2025: Comprehensive Expectations and Sectoral Analysis - Part 1

As India eagerly anticipates the Union Budget 2025, there's a tangible sense of excitement and hope in the air. With economic challenges persisting, the budget holds the potential to deliver key reforms that can address these issues, boost infrastructure development, streamline taxation, and drive overall growth. Set to be unveiled by Finance Minister Nirmala Sitharaman on February 1, 2025 this budget is seen as a crucial step toward India's vision of becoming a “Viksit Bharat” (Developed India) by 2047.

In this blog, we’ll explore the detailed expectations surrounding the budget, sectoral benefits, anticipated reforms in GST and taxation, and insights into the public suggestions for government decisions. We'll also look at the potential advantages and disadvantages that may arise from the upcoming budget. It’s an exciting time as we look forward to how this momentous budget could shape India’s future.

 

1. GST: Transforming Indirect Taxation

The Goods and Services Tax (GST) has significantly transformed India’s tax landscape, but there’s still room for refinement. Stakeholders across industries are calling for further adjustments to simplify the compliance process and make essential goods and services more affordable for consumers.

Expectations:

·         Simplified Compliance: Easing the GST filing process, particularly for MSMEs and startups, by reducing paperwork and making it more user-friendly.

·         Rate Rationalization: Lowering GST rates on essentials, including electric vehicles (EVs) and critical services, to make them more accessible and affordable for the public.

·         Clarity on Reverse Charge Mechanism (RCM): Providing clearer guidelines on the Reverse Charge Mechanism to eliminate confusion and ease compliance for businesses.

Public Suggestions:

·         Zero GST on Life-Saving Drugs: Implementing a zero-GST rate on medicines and medical devices to lower healthcare costs and make treatment more affordable for all.

·         Monthly GST Reconciliation Tools: Offering tools that help businesses reconcile GST data on a monthly basis, reducing discrepancies and improving accuracy.

·         GST on Small-Ticket Goods: Cutting GST on low-cost consumer items like processed foods and everyday apparel, ensuring that basic goods remain affordable for all.

These expected changes could significantly ease the financial burden on both businesses and consumers, reinforcing GST’s potential as a truly progressive reform.

 

2. Income and Corporate Tax Reforms

Income and corporate tax reforms are anticipated to bring much-needed relief to taxpayers while encouraging investment, especially in emerging and sustainable sectors. These reforms are seen as key to fuelling economic growth and making India an even more attractive destination for business and innovation.

For Individuals:

·         Increase in the Basic Exemption Limit: Raising the limit from ?3 lakh to ?3.5 lakh, offering more financial freedom for middle-income earners.

·         Increase in Deductions under Section 80C: Raising the deduction limit from ?1.5 lakh to ?2.5 lakh, with provisions for newer investment avenues like digital and green technologies.

·         Additional Deductions for Digital Skills: Introducing deductions to encourage skill development in digital technologies, empowering individuals to thrive in the rapidly evolving job market.

For Corporates:

·         Reduce Corporate Tax for Small Businesses: Cutting the corporate tax rate to 20% for MSMEs, helping them grow and contribute to job creation.

·         Incentives for ESG Investments: Offering tax breaks and incentives for investments in companies that focus on environmental sustainability, social impact, and strong governance practices.

Public Suggestions:

·         Simplify Capital Gains Tax: Making capital gains tax structures more straightforward to encourage greater retail investor participation in the markets.

·         Tax Benefits for Green Technologies: Providing tax incentives for industries focusing on electric vehicle manufacturing, renewable energy, and other green initiatives to help fight climate change.

These reforms are aimed at empowering individuals and businesses alike, paving the way for a more inclusive and sustainable economic growth. They could potentially unlock significant opportunities across various sectors, fuelling progress and innovation.

 

3. Agriculture: Focusing on Rural Empowerment

Agriculture is the backbone of rural India, and targeted reforms in this sector have the potential to significantly enhance farmer incomes and improve the overall economic landscape. By focusing on key areas like subsidies, credit access, and technology, the government can provide crucial support to farmers, helping them navigate challenges and capitalize on new opportunities.

Expectations:

·         Increase Subsidies: Expanding subsidies for fertilizers, seeds, and crop insurance to alleviate financial burdens on farmers.

·         Expand Credit Access: Strengthening the Kisan Credit Card (KCC) scheme to provide farmers with easier access to affordable credit.

·         Promote Agri-Tech: Encouraging the adoption of AI-based solutions, precision farming, and other technological innovations to improve productivity and sustainability.

Advantages:

·         Boosts Rural Incomes: Supporting the agricultural sector can reduce rural poverty, improve livelihoods, and create jobs in these communities.

·         Improves Food Security: Strengthening supply chains and increasing agricultural productivity will help ensure food security across the country.

Disadvantages:

·         High Subsidies: While subsidies provide immediate relief, they could strain the fiscal budget if not managed effectively.

·         Monsoon Dependency: A continued reliance on the monsoon makes farmers vulnerable to unpredictable weather patterns, affecting crop yields.

Public Suggestions:

·         Water Conservation Projects: Allocating funds for irrigation and water conservation initiatives, which are essential for improving water management in farming.

·         Promote Organic Farming: Encouraging organic farming practices to cater to the growing demand for premium exports, while also boosting environmental sustainability.

With a more robust support system, the agricultural sector can not only thrive but also become a driving force for rural development and sustainability. These reforms could pave the way for a more resilient and prosperous future for India’s farmers.

 

4. Infrastructure and Real Estate: Building for Growth

Infrastructure is a key catalyst for economic growth, and the Union Budget 2025 is expected to make substantial investments to enhance connectivity and support urbanization across the country. These reforms are seen as crucial to modernizing India's infrastructure, driving economic activity, and improving the quality of life for millions of citizens.

Expectations:

·         Increase Budget Allocations: Significant funding for roads, railways, ports, and the development of smart cities to enhance connectivity and modernize urban spaces.

·         PPP Incentives: Encouraging public-private partnerships (PPPs) to speed up infrastructure projects and ensure faster delivery of essential services.

·         Affordable Housing Initiatives: Offering higher tax rebates for first-time homebuyers to make housing more accessible, especially for low- and middle-income families.

Advantages:

·         Job Creation: Infrastructure development is a powerful driver of job creation across construction, logistics, manufacturing, and other sectors.

·         Improved Connectivity: Upgrading transportation and communication networks will improve industrial efficiency, reduce logistics costs, and support regional development.

Disadvantages:

·         Execution Delays: Bureaucratic bottlenecks and red tape could delay the timely completion of projects, impacting overall progress.

·         Urban Congestion Risks: Rapid urbanization without adequate planning could lead to overcrowded cities and pressure on existing infrastructure.

Public Suggestions:

·         Green Infrastructure: Focus on energy-efficient buildings and solar-powered transport systems to promote sustainability in urban growth.

·         Affordable Housing Bonds: Introducing bonds for retail investors to invest in affordable housing projects, giving them a stake in the country’s development while funding vital housing initiatives.

With a strong push toward improving infrastructure, the Union Budget 2025 could open new avenues for growth and job creation, while ensuring that urbanization is sustainable and inclusive. If executed effectively, these reforms could help India emerge as a global leader in infrastructure development.

Stay Tuned For Part 2