Finance Minister Nirmala Sitharaman’s eighth Union Budget 2025 has made headlines — not just for offering tax relief to the middle class, but for doing so without compromising the country’s financial health. It’s a balancing act that’s rare in politics — being generous to the people while staying responsible with the government’s money.
A BUDGET WITH SUSPENSE
The way budget 2025 was presented felt like something out of a suspense film. For most of her 74-minute speech — her shortest yet — the Finance Minister kept the middle class guessing. She mentioned them briefly in paragraph 6, but the real announcement came much later, in paragraph 161. It was a dramatic delay, leaving people glued to their screens.
But the wait was worth it. Sitharaman announced a significant raise in the personal income tax exemption limit — from ₹7 lakh to ₹12 lakh. Salaried individuals will also continue to benefit from the ₹75,000 standard deduction. This means that someone earning ₹1 lakh per month will now save about ₹80,000 a year. Those earning ₹50 lakh annually will get around ₹1.1 lakh extra in hand.
WHAT THIS MEANS FOR THE AVERAGE PERSON
More money in people’s pockets could mean two things: higher spending or higher savings. Either way, it’s good news for the economy. If people spend more on items like groceries, appliances, or even housing, it drives up demand, helping businesses grow. If they save, it adds to the capital available in banks and financial markets, which can be invested in development projects.
We saw some early signs of this in the stock market. While the broader Sensex and Nifty indices remained flat, specific sectors like consumer goods, real estate, and durables saw a small rally. For example:
- FMCG (Fast Moving Consumer Goods) stocks rose 2.9%
- Consumer durables rose 2.5%
- Real estate stocks went up by 3.6%
These numbers suggest that businesses expect people to spend more, especially on essentials, appliances, and housing.
THE POLITICAL ANGLE
For years, the middle class has felt that its needs are often ignored by policymakers. With this move, the government has tried to win back its goodwill. Whether this financial relief turns into political support, especially with elections around the corner, is something we’ll see in the coming weeks.
A CLOSER LOOK AT TAX NUMBERS
India’s middle-income group, those earning between ₹5 lakh and ₹30 lakh per year, includes around 98 million households. But surprisingly, only 15 million of them pay income tax. This small segment contributes ₹1.4 lakh crore to the government annually.
This means there’s a huge gap — an estimated ₹7.8 lakh crore worth of potential taxes that aren’t being collected. And it’s not just the middle class. Wealthier individuals earning above ₹30 lakh are also slipping through the cracks, dodging taxes worth around ₹23.4 lakh crore.
So, while the government is giving up about ₹1 lakh crore in revenue due to this year’s tax cuts, it has the opportunity to make up for it — by tightening tax enforcement and closing loopholes. It’s a fair trade-off: reward honest taxpayers while pulling evaders into the system.
STAYING FISCALLY RESPONSIBLE
Despite the major tax giveaways, the budget has stayed financially disciplined. The fiscal deficit — the gap between the government’s income and spending — is expected to be 4.8% of GDP this year and 4.4% next year. This is a clear downward trend from the COVID-era peak of 9.2% in 2020.
Here’s how the deficit has shrunk over the years:
- 2020: 9.2%
- 2021: 6.8%
- 2022: 6.4%
- 2023: 5.8%
- 2024: 5.1%
- 2025 (projected): 4.8%
- 2026 (projected): 4.4%
This slow but steady improvement shows the government’s commitment to fiscal prudence — spending wisely while keeping debt under control.
UNDERSTANDING THE BUDGET’S SIZE
The total budget 2025 is ₹50.65 lakh crore, which is 5% higher than last year’s. Since 2014, the budget has nearly tripled, growing at an average annual rate of 10.5%. However, some costs, like interest payments and pensions, are growing even faster — about 11.5% per year. These rising expenses need to be managed better to create space for development spending.
Also notable is the change in where the government gets its money from:
- Individual income tax now makes up 22% of total revenue (up from 16% in 2018)
- Corporate taxes contribute 17% (down from 19%)
- GST accounts for 18% (down from 23%)
On the spending side, interest payments alone now eat up 20% of the budget 2025.
TRADE AND TARIFFS: A MESSAGE TO THE U.S.
Another smart move in the budget 2025 was the removal of seven different tariff rates. This might seem like a technical detail, but it’s a strategic step. With global trade tensions in mind, especially in upcoming talks with U.S. President Joe Biden, India is showing that it’s open to discussion and reform. It also helps Indian businesses that rely on imported goods for production.
This follows similar tariff adjustments made in the 2024 budget and signals that India wants to present itself as a serious player in global trade negotiations.
MISSED OPPORTUNITIES FOR REFORMS
Despite the many positives, one thing the budget2025 didn’t address is the need for deeper economic reforms. The Economic Survey 2025 called for deregulation, especially reducing unnecessary laws and bureaucratic red tape. Yet, this budget 2025 barely touched on that.
The only mention was the introduction of Jan Vishwas 2.0, which plans to decriminalize 100 more laws. But even with this, there are still over 5,000 laws that carry prison terms for minor issues. This gives too much power to bureaucrats and creates fear among entrepreneurs and businesses. For a government that talks about promoting ease of doing business, this area still needs urgent attention.
Key Highlights from Budget 2025
POSITIVE MOVES
- Focus on consumption rather than just government capital expenditure.
- Tax benefits worth ₹1 lakh crore will put more money in the hands of consumers.
- Interest-free loans of ₹1.5 lakh crore to states for infrastructure development.
- Foreign direct investment (FDI) in insurance increased to 100%, attracting more foreign investment.
- Support for key sectors: clean energy, tourism, mining, and aviation.
AREAS OF CONCERN
- Capital expenditure reduced from ₹11.1 lakh crore to ₹10 lakh crore, slowing infrastructure momentum.
- Heavy industry investments may be impacted due to lack of long-term government support.
- Borrowings still high: ₹11.54 lakh crore in net borrowings could affect financial markets.
IMPACT ON INVESTMENTS: WHAT SHOULD INVESTORS WATCH?
SECTORS LIKELY TO BENEFIT
- Consumer Goods & Retail
With more money in people’s hands, companies making everyday items (like toothpaste, biscuits, or clothing) are expected to grow. Auto and retail stocks also benefit. - Clean Technology
Incentives for electric vehicle batteries, solar panels, and wind energy are a boost for companies in the clean tech space. - Infrastructure Support (State Level)
Though central government spending on infrastructure is down, interest-free loans to states keep the engine running for infra-related stocks. - Insurance and Power
With 100% FDI now allowed in insurance and more attention on nuclear and renewable energy, companies in these sectors have room to expand. - Shipbuilding, Aviation & Tourism
With policy support, these industries — especially tourism, with 50 new destinations — could see higher demand and investment.
SECTORS THAT MAY STRUGGLE
- Capital Goods and Infra Companies
Less government spending could hurt construction and capital equipment companies in the short term. - Heavy Industries
Industries relying heavily on long-term government projects might see delays in new business or funding.
CONCLUSION
Budget 2025 is a well-balanced and strategic move by the government. It provides real financial relief to the middle class, stimulates consumption, and shows international partners that India is ready for global trade conversations. At the same time, it sticks to a disciplined fiscal path.
However, the budget 2025 does not do much to push economic reforms that could make doing business in India easier. The heavy hand of regulation still holds back entrepreneurs and job creators. For investors and citizens alike, the message is clear: this is a budget that offers immediate benefits and stability, but the work of long-term reform is still far from done.
– Bhawna singh
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