The Union Budget of 2025 for the rest of FY25 and the whole of FY26 is all set to take to pass on February 1, 2025. This would be incumbent finance minister Nirmala Sitaraman’s 8th budget as the finance minister, a position/post that she has held since 2019.
Interestingly, the Indian indices will also remain operational on February 1, which is a Saturday.
The last full budget that came to pass after the 2024 general election happened in July 2024. That budget came under a lot of fire for being allegedly anti-middle class or not being helpful enough to the middle class in India.
Just six months after that, we are now gearing up for the next budget. As we look forward to February 1, what are the factors playing a role?
We take a look at some of the factors that are at play.
As India aspires to become the next manufacturing hub, it would cross paths with Trump’s own re-industrialisation path or vision for the US. | AFP PHOTO
GDP Growth
Unlike in July, India is currently marred by two main problems, namely inflation and GDP growth. As per the most recent data from the National Statistics Office or NSO, as per extrapolations of estimates, India’s real GDP growth for FY25 will be 6.4 per cent.
This is lower than the estimates previously presented by the government and the RBI, which pegged the growth between 6.6 and 7.00 per cent. Adding to the woes was the growth rate attained in the second quarter (July-September), when the GDP rate slumped to 5.4 per cent, lowest in nearly two years.
Inflation
Another major macroeconomic factor in the mix is inflation. While the beginning of 2024 saw manageable levels of inflation, the story changed in the following months of the year.
India’s Retail Inflation To Remain Above 5% Till May: SBI Research report | Representational Image/Pixabay
Retail and wholesale inflation has slowly spiked, even reaching the mark of 6.21 per cent in October, which itself rose from 5.49 per cent in September. Although the inflation rate has since come down, as per latest estimates it is expected to remain above 5 per cent. This is above RBI’s threshold of 4 per cent.
Sectors in Focus
Sectoral aspiration and what and here the government chooses to allocate the exchequer’s resources is crucial. The renewable energy and tech sector, particularly the advanced tech sector, dealing with AI would be in focus.
Meanwhile, the slowdown in manufacturing and reduced consumption capability owning to inflation would be another matter that would under the scanner.
Markets
From macro we move to equity, the equity is a representation of the larger investor confidence in the market. The Indian equity benchmarks, Sensex and Nifty have not had the best time in the recent months.
In the past 6 months, the BSE Sensex has declined by 3.35 per cent or 2,694.36, taking the overall value to 77,657.28.
Representative Image
The NSE Nifty on the other hand dropped in value by 3.67 per cent or 896.70 points, pushing the cumulative value to 23,536.50.
As the markets remain open on the budget day, it remains to be seen whether Sitharaman’s budget will take Dalal Street on a euphoric ride or drown them in deep red sea.
Donald Trump
Final, foreign policy is outside the direct purview of FM Sitharaman, trade definitely affects the macro picture of the country. Trade policies of the incoming Trump Administration at the White House would play a major role in the developments elsewhere.
Imports and exports would then come into the picture. As India aspires to become the next manufacturing hub, it would cross paths with Trump’s own re-industrialisation path or vision for the US.
PIC: AFP
If Trump follows through with his aggressive America first policy, then the aftermath could mark a paradigm shift for many economies, including that of India.
Will FM and her budget would take pre-emptive actions in her budget to shield Indian interests is something that remains to be seen.
Irrespective of how the budget is judged after February 1, it, by all means is set to be a historic budget.
