Relief and promises in budget

It would not be improper to say that a proportion of India’s population has become the limelight of the Union Budget for 2025-26. An income tax relief amounting to 1 trillion (about 2.5 per cent of the Centre’s gross tax revenue) announced for about 4.3 Crore individual taxpayers. Such a big relief in one go is unprecedented in the history of the country.

Finance Minister Nirmala Sitharaman announced in her seventh consecutive full Budget just not reduced personal income-tax rates for different income slabs, but also a series of relief for the middle class, including easier norms for the tax deduction at source to reduce the burden on the taxpayer. This approach was on a diagnosis of the state of the Indian economy, which suggested that a demand boost through tax inducement could revive growth.

Only time will tell if the huge income-tax relief for that small proportion of Indian people would result in a consumption boost reviving demand and growth.

What’s more, FM presents the promised debt anchor for her fiscal consolidation programme for five years from 2026-27.

This Budget is a lot about transparency as well. The Budget documents continue to make disclosures about the government’s off-Budget borrowings (which were brought down to nil in 2023-24 and are projected to be nil in the following two years also).

Of the five promises FM had made in her July 2024 Budget, she has delivered on four. The unified pension scheme would be rolled out from April 2025. Customs rationalisation has been undertaken, resulting in a cut in the Customs duty on 26 items a lowering of the effective as well as tariff rates for 14 items, and a reduction in the tariff rates for 37 items.

A new income-tax regime is in place. A debt-anchored fiscal consolidation programme has been unveiled. The only thing that remains to be outlined in detail are the contours of an economic policy framework to initiate fresh second-generation reforms in factor markets such as land, labour and capital, however though there are many references in the Budget on reforms of power distribution, urban sector, regulatory architecture, mining, taxation and insurance, where the foreign investment cap was raised to 100 per cent.

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