Income up to Rs 12 lakh tax-free; consumption, capex key drivers

Despite this, Sitharaman has kept a leash on government finances; the fiscal deficit for this year is now estimated at 4.8 per cent of the GDP, and that for 2025-26 at 4.4 per cent of GDP. This is lower than the glide path which required her to bring down the deficit to under 4.5 per cent.

The big tax giveaway means revenue foregone of Rs 1 lakh crore, but with its upside impact on growth difficult to quantify, the Budget has assumed a nominal growth rate of 10.1 per cent for 2025-26.

This may have been deliberate on the part of the finance ministry. The growth realism gives the government some fiscal space should there be a consumption boost leading to a consequent increase in growth.

But for Sitharaman, the tax relief is meant to express the government’s acknowledgement of the role taxpayers have in the economy. “I had to do this for the taxpayer citizens,” she told The Indian Express. It is estimated that the change in tax slabs and the hike in tax rebate limit to Rs 12 lakh a year from Rs 7 lakh a year will benefit at least 1.75 crore citizens, and buoy the sentiments of the middle class.

Calling it the “people’s Budget”, Prime Minister Narendra Modi said, “Normally, budgets focus on raising revenues… but this Budget is about filling the pockets of citizens, increasing their savings, and co-opting them in the country’s development.”

The Budget didn’t lose sight of the Assembly elections in Bihar later this year. From a Makhana (fox nuts) Board in Bihar to a National Institute for Food Technology, the Entrepreneurship and Management, the largesse for the state also included a brownfield airport in Bihta, expansion of IIT Patna, and a Western Kosi canal project for farmers in the Mithilanchal region.

Taking forward the initiatives of last year, Sitharaman identified four engines of growth: agriculture, exports, MSMEs and investment.

At the heart of these initiatives is an effort to focus on sectors that are labour intensive and also generate more employment.

Among the new schemes announced is the Prime Minister’s Dhan Dhanya Krishi Yojana that will cover 100 districts with low productivity, moderate crop intensity and below-average credit parameters. It is expected to benefit 1.7 crore farmers. She also set up an Urban Challenge Fund of Rs 1 lakh crore to promote cities as growth hubs and announced a special window for affordable and mid-income housing to build 50,000 dwelling units.

In what will give a big push to private sector participation in nuclear energy, the Budget announced a Rs 20,000-crore outlay for Small Modular Reactors, and proposed amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act.

In the backdrop of the Red Sea crisis, the government also announced a ship-building financial assistance policy and made a provision for ship building clusters.

Sitharaman also said a new Income tax Bill will be ready next week. This is expected to streamline existing provisions and is aimed at imparting more certainty and reducing tax litigation.

The Budget also continued with the realignment of Customs duties for making intermediates and inputs cheaper, a move that is expected to improve the competitiveness of the manufacturing sector. Sitharaman announced the setting up of National Manufacturing Mission that would cover small, medium and large industries and extend policy support, execution road maps, governance and monitoring framework for Central ministries and states.

The revised estimate of the fiscal deficit for 2024-25 is 4.8 per cent of the GDP and lower than BE of 4.9 per cent of GDP; this is largely on account of lower expenditure, especially capital expenditure, which is Rs 1 lakh crore lower than the BE of Rs 11.11 lakh crore.