The Union Budget 2025 has sparked significant debate across various sectors, with experts and political voices weighing in on its potential impact. The budget, presented with a focus on providing relief to the common man and boosting economic activity, includes key provisions like tax concessions, credit facilities, and measures aimed at sectors such as agriculture and MSMEs. However, questions remain about its ability to spur long-term economic growth and address structural challenges like unemployment and wage stagnation. We spoke with Mr. Subhash Chandraga, former finance secretary, to understand his views on the budget and its implications for the Indian economy.
The Excerpts from the interview
Q1: What are the key highlights of the Union Budget 2025?
A1: The Union Budget 2025 has introduced several changes, particularly focusing on income tax reforms. The income tax exemption limit has been raised from ₹7 lakh to ₹12 lakh. The government has also rationalized tax slabs, providing some relief to taxpayers. Other areas of focus include credit facilities for farmers and MSMEs, but questions remain regarding the budget’s effectiveness in stimulating growth and addressing unemployment.
Q2: How does the government’s income tax proposal impact the common man?
A2: The government’s proposal to exempt income tax for earnings up to ₹12 lakh is beneficial for a section of the population. However, not everyone will benefit equally, especially those who had been availing exemptions under the old tax regime (like house rent or medical reimbursements). Many taxpayers will need to evaluate whether shifting to the new regime, where they lose these exemptions, will ultimately be more beneficial.
Q3: Will the budget effectively boost economic growth?
A3: While some steps like tax relief and credit facilities may offer short-term benefits, the overall impact on growth may be limited. The budget does not show substantial growth in capital expenditure, which is typically seen as a key driver of economic growth. There is also concern that without sufficient increase in government spending, growth could be slower than desired.
Q4: What is the impact of the reduced fiscal deficit and borrowing on the economy?
A4: The government has projected a slight reduction in the fiscal deficit, but it still remains above the statutory 3% limit. Gross market borrowings for the coming year have increased, which could affect liquidity in the market, leaving fewer resources available for private businesses. Although fiscal consolidation is ongoing, the budget’s ability to balance growth stimulation with fiscal discipline remains a point of concern.
Q5: How does the budget address the employment generation issue in India?
A5: Employment generation seems to be a secondary focus in this budget. While some schemes for farmers and MSMEs have been introduced, there was no prominent mention of strategies to tackle unemployment directly. The real issue lies in the decline of real wages, which has led to reduced consumption and overall economic welfare. Simply increasing the number of people employed is not sufficient if wages continue to fall.
Q6: How does the Union Budget address the challenges in agriculture and MSME sectors?
A6: The government has expanded credit facilities for farmers through enhanced Kisan Credit Cards and for MSMEs via customized credit cards. These measures aim to ensure easier access to finance for productive purposes like crop cultivation and business setup. However, the success of these initiatives will depend on how well they are implemented and whether banks make commercial decisions in extending these loans.
Q7: How is the budget responding to global economic factors, especially the tensions with the US and China?
A7: While the budget does not directly address geopolitical tensions, it implicitly recognizes the interdependence of the Indian economy with global trade. The trade surplus with the US is positive, but potential trade restrictions could pose risks. In terms of China, India faces challenges in technology and manufacturing, where China currently holds a dominant position. The budget does not provide a clear strategy on navigating these challenges, which could hurt India’s long-term economic growth if not addressed.
Q8: How do you rate the Union Budget 2025?
A8: Rating the budget is a detailed process that requires assessing multiple factors, including fiscal deficit, revenue growth, and government expenditure. While some aspects of the budget show promise, especially the tax relief measures, the lack of strong steps to boost capital expenditure and address unemployment and wage stagnation leaves room for improvement. A more comprehensive evaluation will follow once detailed analysis is completed.
Q9: Are there any concerns regarding the long-term effects of the budget on India’s economy?
A9: Yes, one of the major concerns is the limited scope for growth stimulus due to the moderate increase in capital expenditure. With the fiscal deficit remaining high, the government may need to reduce expenditure, which could further dampen economic growth. Additionally, addressing the challenges of employment and income stagnation will require more than just fiscal measures. The budget does not present strong solutions for these structural issues, which could affect long-term prosperity.
Q10: What’s your overall assessment of the Union Budget 2025?
A10: The Union Budget 2025 provides relief in certain areas, particularly tax exemptions and credit facilities for farmers and MSMEs. However, it lacks bold steps in addressing crucial issues like unemployment, wage stagnation, and substantial capital expenditure for economic growth. As the year progresses, a more detailed analysis of its fiscal impact will provide further insights into its long-term efficacy.
Conclusion:
In conclusion, while the Union Budget 2025 presents a mixed bag of measures aimed at providing short-term relief and facilitating access to credit, it leaves several crucial economic challenges unaddressed. The limited focus on capital expenditure and employment generation could slow down the economic momentum. Experts suggest that the government’s fiscal strategy and its ability to tackle long-term issues such as wage stagnation, unemployment, and sustainable growth will define the true impact of this budget in the years to come.
