February 02, 2025

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RECIPE FOR GROWTH

THE UNION BUDGET is always a significant annual event that sets the policy tone and agenda for the next financial year. But Budget 2025-26 will be even more special and vital. It will set apart Nirmala Sitharaman as just one of the few Finance Ministers in India who have presented as many as eight Union Budgets. Apart from her, just three previous Union Finance Ministers—Morarji Desai, P. Chidambaram, and Pranab Mukherjee—have had the privilege to present eight or more Union Budgets. However, apart from this rare honour, the Union Budget 2025-26 comes at a time when the economy is facing challenges on almost all fronts. Domestically, growth is slowing and is now estimated at 6.4% for this fiscal and at less than 7% in FY26. Retail inflation has remained stubbornly high and is seen to average 4.8% in FY25. This has impacted urban consumption demand, which has shown signs of moderation in recent months. Meanwhile, manufacturing growth is still sputtering, and private investment and capex are yet to fully kick in. Job creation and skilling and upskilling of workers and providing policy support to micro, small and medium enterprises (MSMEs) remain other key challenges. The external environment, too, remains full of challenges that are playing out on the domestic economy. Global growth remains muted, keeping demand for Indian exports subdued. Two wars continue to wage in different parts of the world and any escalation of the conflict in the Middle East could potentially tip the scales on India's crude oil supplies. In the US, President-elect Donald Trump is set to be sworn in on January 20, 2025, and his policies on not only tariff but other economic issues could have a direct impact on India in terms of exports as well as inflation and the value of the rupee vis-à-vis the US dollar. The rupee has already breached 86 to a dollar and concerns remain about further depreciation that could possibly lead to imported inflation. In this backdrop, Sitharaman will have to walk the tightrope and ensure that the Budget pays adT equate heed to each of these challenges and balances the various interests and calls for higher allocations and tax relief. With the Budget set to be presented on February 1, the Finance Minister and her team of officials in North Block have got down to the nitty-gritty and the nuances of the Budget-making process. They have suggestions and recommendations galore after holding several rounds of inter-ministerial parleys and pre-Budget in-person consultations with more than a 100 invitees across nine stakeholder groups that includes industrialists, exporters, labour leaders and economists to name a few. Prime Minister Narendra Modi,

TIME FOR A TAX BREAK?

AS THE GOVERNMENT prepares the Union Budget for 2025-26, which is expected to chart the course for the next four years of Prime Minister Narendra Modi's government, there is one demand that is refusing to go away: a reduction in income tax rates for India's burgeoning middle class. Consistently high inflation and pricey food items have eaten into the disposable incomes of urban Indians, with private consumption in urban areas seen to be moderating while salaried and middle-class professionals argue that the main burden of personal income taxes falls on them. Besides, they add, consumers already pay high rates of goods and services tax (GST). The demand for a reduction in rates comes as the number of individual income taxpayers in the country is estimated to cross the 100-million-mark in FY24, after coming in at 99 million in assessment year 2023-24 (FY23)In fact, personal income tax (PIT) collections, inclusive of securities transaction tax (STT), crossed `10.45 lakh crore in FY24, helping to keep the government's coffers full, as against `9.11 lakh crore from corporate taxes. Between April and January 12, non-corporate taxes (including taxes paid by individuals, Hindu Undivided Families or HUFs, and firms) net of refunds amounted to `8.74 lakh crore and seem to be on track to meet the Budget Esti-