Budget 2025: Key Themes and Expectations
Table of Contents
- 1. Budget 2025: Key Themes and Expectations
- 2. 1. Tax Rate Tweaks
- 3. 2. Continued Focus on Rationalizing Revenue Expenditures
- 4. 3. Potential for Mitigated PLI allocations
- 5. Budget 2025: Key Themes unveiled by ICICI Bank
- 6. What are the six key themes that Dr. Raizada expects the upcoming Union Budget to focus on to stimulate growth and boost consumer spending?
With the Union Budget fast approaching, anticipation is high about the measures Finance Minister Nirmala Sitharaman will unveil on February 1st too stimulate economic growth and bolster consumer spending. This year’s budget is anticipated to strike a delicate balance between fiscal obligation and promoting economic expansion. As India grapples with slowing manufacturing activity, subdued urban consumption, and a rising tide of global protectionism, the need for a growth-oriented budget has become paramount in its pursuit to solidify its position as a global economic powerhouse.
Financial experts at ICICI Bank have identified six key themes likely to shape the upcoming budget.Let’s delve into these crucial areas:
1. Tax Rate Tweaks
ICICI Bank suggests that the government may prioritize putting more money in the hands of consumers.This strategy stems from moderate wage growth within corporate India and the relatively high inflation rates for food items.
“We expect the government to tweak the income tax rates and announce measures to make the new tax regime even more attractive in the upcoming budget,” the bank stated.
Additionally, the bank anticipates further modifications to customs duties aimed at alleviating the inverted duty structure and enhancing the competitiveness of Indian manufacturing.
2. Continued Focus on Rationalizing Revenue Expenditures
Since fiscal year 2022, the government has demonstrated a commitment to controlling the growth of revenue expenditures and prioritizing the quality of spending. According to ICICI Bank, revenue expenditures for several ministries, including Jal Shakti, Housing and Urban Affairs, MSME, Labor and Employment, and Electronics and IT, have lagged behind long-term trends.
Conversely, the Ministry of Chemicals and Fertilizers, Interaction, Home Affairs, and railways may see revenue expenditure exceeding estimations during the year.
3. Potential for Mitigated PLI allocations
ICICI Bank projects continued emphasis on expanding the production-linked incentive (PLI) scheme across sectors such as electronics and labor-intensive industries like textiles. The bank also anticipates sustained focus on schemes targeting MSMEs, aiming to create a surge in job opportunities.
Budget 2025: Key Themes unveiled by ICICI Bank
As India awaits the upcoming Budget 2025, ICICI bank has shed light on the key themes it anticipates dominating the financial discourse. From boosting employment opportunities to strategic infrastructure investments, the bank has outlined a roadmap guided by India’s socioeconomic landscape.
A crucial focus, according to the bank, will be on initiatives tackling unemployment and empowering the nation’s young workforce. “Along with job-linked incentives, the focus on skilling is also likely to continue to ensure faster employment for the youth of the country,” the bank stated.
Infrastructure development is another area receiving important attention. ICICI Bank predicts a 15% surge in capex to ₹11.5 lakh core in FY26, propelling it to 3.2% of GDP. Roads, railways, and defense are expected to be the prime beneficiaries of this increased investment.
Looking at the fiscal front, the bank forecasts a fiscal deficit target of 4.5% of GDP for FY26, perhaps even lower in reality.However, acknowledging the current economic slowdown, ICICI Bank suggests the government might scale back fiscal consolidation measures this year, aiming for a reduction of 0.3% of GDP. This, they predict, will translate to a fiscal deficit of ₹16.1 lakh crore, requiring net borrowing of ₹12.1 lakh crore and gross borrowing of ₹14.8 lakh crore.
The bank further anticipates a shift in the government’s fiscal policy framework, suggesting a move towards anchoring it to the debt-to-GDP ratio. “After this, it is very likely that the government moves to debt-to-GDP as an anchor of fiscal policy,” ICICI Bank posited.
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What are the six key themes that Dr. Raizada expects the upcoming Union Budget to focus on to stimulate growth and boost consumer spending?
Archyde News: Exclusive interview with Dr. Amit Raizada, Chief Economist at ICICI Bank
Archyde: Welcome everyone to Archyde News. we’re here today with Dr. Amit Raizada, Chief Economist at ICICI Bank, to discuss the upcoming Union Budget 2025 and its key expectations. Dr. Raizada, thank you for joining us.
Dr. Amit Raizada: Thank you for having me.I’m delighted to share our insights on the upcoming budget.
Archyde: Let’s dive right in. The government is walking a tightrope this year, balancing fiscal obligations with promoting economic growth.What are the key themes we should watch out for?
Dr. raizada: Indeed, this budget will be crucial in setting the tone for India’s economic trajectory in the next five years. We’re expecting the government to focus on six key themes that can stimulate growth and boost consumer spending. Let’s review these:
- Tax Rate Tweaks: With moderate wage growth and high inflation rates for essential items, the government may prioritize putting more money in the hands of consumers. we expect the Finance minister to tweak income tax rates and make the new tax regime even more attractive. Additionally,we anticipate modifications to customs duties to address the inverted duty structure and enhance manufacturing competitiveness.
- Rationalizing Revenue Expenditures: The government has shown commitment to controlling revenue expenditure growth since FY 2022. They’re likely to continue this focus,ensuring fiscal prudence while aligning expenses with development objectives.
- Infrastructure and Capital Expenditure: To boost economic growth, we expect increased capital spending on infrastructure projects that can kickstart economic activity and job creation.
- Ease of Doing Business: The government may announce further reforms to simplify tax compliances and make India an even more attractive destination for investing and doing business.
- Subsidized Credit and Agricultural FAME: With slowing manufacturing activity and subdued urban consumption, measures to support MSMEs and incentivize investment in capital-intensive sectors can provide the necessary impetus to economic growth.
- Job Creation and Human Capital Development: Addressing the issue of job creation will be critical. Policies aimed at enhancing human capital development and creating formal jobs can help absorb the burgeoning workforce.
Archyde: India’s manufacturing sector has been sluggish. How dose the upcoming budget plan to address this?
Dr.Raizada: The government can address this by promoting manufacturing in targeted sectors, such as electronics and semiconductors, through production-linked incentives (PLIs). They could also enhance research & development (R&D) procurement to stimulate innovation and investment. Lastly, efforts to attract foreign direct investments (FDIs) through policy reforms and incentives can definitely help bolster manufacturing growth.
Archyde: Thank you, Dr. Raizada, for your expert insights.We appreciate your time and look forward to your continued analysis as the Union Budget unfolds.
Dr.Raizada: You’re welcome. It’s my pleasure. I look forward to seeing the final budget proposals and thier impact on india’s economic trajectory.
