On February 1, 2025, Finance Minister Nirmala Sitharaman presented India’s Union Budget, unveiling a series of strategic initiatives aimed at bolstering economic growth, enhancing the financial well-being of the middle class, and strengthening key sectors such as agriculture, infrastructure, and innovation.
Significant Tax Reforms Favoring the Middle Class
A cornerstone of the 2025 budget is the substantial relief provided to middle-class taxpayers. The government has raised the income tax exemption threshold from ₹7 lakh to ₹12 lakh, meaning individuals earning up to ₹12 lakh annually are now exempt from paying income tax. Additionally, the standard deduction has been increased to ₹75,000 from the previous ₹50,000, allowing individuals with incomes up to ₹12.75 lakh to be free from income tax obligations. This move is anticipated to boost household consumption, savings, and investment, thereby stimulating domestic demand amid global economic uncertainties.
The revised tax slabs under the new regime are as follows:
Income Range (₹) Tax Rate
Up to 4,00,000 - Nil
4,00,001 to 8,00,000 - 5%
8,00,001 to 12,00,000 - 10%
12,00,001 to 16,00,000 - 15%
16,00,001 to 20,00,000 - 20%
20,00,001 to 24,00,000 - 25%
Above 24,00,000 - 30%
These adjustments are designed to reduce the tax burden on the middle class, thereby increasing disposable income and fostering economic growth.
Agricultural Initiatives for Sustainable Growth
Recognizing the critical role of agriculture in India’s economy, the budget introduces the Prime Minister Dhan-Dhaanya Krishi Yojana, targeting 100 districts and benefiting approximately 1.7 crore farmers. This initiative aims to enhance agricultural productivity and farmer incomes. Additionally, the government has launched a six-year mission focusing on self-reliance in pulse production, particularly Tur, Urad, and Masoor, to reduce dependence on imports. The establishment of a Makhana Board in Bihar is also planned to promote the cultivation and marketing of this unique aquatic crop.
To further support farmers, the budget proposes enhancing credit access through the Kisan Credit Card (KCC) scheme, facilitating short-term loans of up to ₹5 lakh for 7.7 crore farmers, fishermen, and dairy farmers. This measure is expected to provide the necessary financial support for agricultural and allied activities.
Investments in Research, Development, and Innovation
The budget allocates ₹20,000 crore to implement a private sector-driven Research, Development, and Innovation initiative, underscoring the government’s commitment to fostering technological advancement. The Prime Minister Research Fellowship program will offer 10,000 fellowships for technological research in premier institutions like IITs and IISc, aiming to cultivate a robust research ecosystem. Furthermore, the establishment of a second Gene Bank with 10 lakh germplasm lines is planned to ensure future food and nutritional security by preserving genetic diversity in crops.
Infrastructure and Export Promotion
The budget emphasizes infrastructure development and export promotion as key drivers of economic growth. Measures include exemptions for components used in electronics and electric vehicles, such as open cells for LED/LCD TVs and capital goods for lithium-ion batteries, to incentivize manufacturing. The government also plans to promote Maintenance, Repair, and Overhaul (MRO) services by providing a 10-year exemption on goods for shipbuilding and shipbreaking, as well as extending time limits for the export of railway goods imported for repairs. Trade facilitation measures, such as setting time limits for finalizing provisional assessments and amending rules to extend time limits for certain declarations, are also introduced to streamline processes and encourage exports.
Balanced Subsidy Allocation
The budget maintains a balanced approach to subsidies, allocating ₹4.57 trillion for food, fertilizers, and rural employment, similar to the previous year’s allocation of ₹4.54 trillion. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) continues to receive ₹860 billion, providing a safety net for rural employment. The fertilizer subsidy is slightly reduced to ₹1.67 trillion from ₹1.71 trillion, while the food subsidy sees a marginal increase to ₹2.03 trillion from ₹1.97 trillion. These allocations aim to support the rural economy and ensure food security.
Market Reactions and Economic Outlook
The budget’s focus on increasing middle-class spending power and supporting various sectors elicited mixed reactions in the stock market. Consumer goods companies experienced gains due to anticipated higher consumption, while infrastructure firms faced declines, possibly due to perceived modest increases in capital spending. The government forecasts GDP growth of 6.3% to 6.8% for the coming fiscal year, reflecting cautious optimism amid global economic uncertainties.
Items Expected to Become Cheaper:
• Mobile Phones and Chargers: The basic customs duty has been reduced to 15%, aiming to make these devices more affordable.
• Gold and Silver: Customs duties have been lowered to 6%, potentially reducing the cost of jewelry and related products.
• Platinum: The duty on platinum has been reduced to 6.5%.
• Cancer Treatment Drugs: Three additional cancer treatment medications have been exempted from customs duties, making them more accessible to patients.
• Seafood: Basic customs duty on certain brood stocks, shrimps, and fish feed has been reduced to 5%, benefiting the seafood industry.
• Critical Minerals: Twenty-five critical minerals have been exempted from customs duties, supporting sectors like renewable energy and high-tech electronics.
Items Expected to Become Costlier:
• Telecom Equipment: The basic customs duty on specified telecom equipment has been increased from 10% to 15%, which may lead to higher costs for these products.
• Ammonium Nitrate: Customs duty has been raised to 10%, potentially affecting industries that utilize this chemical.
• Non-Biodegradable Plastics: The duty on non-biodegradable plastics has been increased to 10%, aiming to discourage their use and promote environmental sustainability.
In summary, the Union Budget 2025 presents a comprehensive strategy to empower the middle class, strengthen key economic sectors, and promote sustainable growth. Through significant tax reforms, targeted agricultural initiatives, investments in research and innovation, and a balanced approach to subsidies, the government aims to revitalize the economy and enhance the prosperity of its citizens.
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