Budget 2025 Preview: What to Expect and Focus Areas for India's Economic Growth

The much-anticipated Union Budget 2025 is slowly approaching and people from various industries, markets, and households are eagerly looking forward to potential announcements that could shape India's economic policies in the coming fiscal year.

The July 2024 Union interim Budget brought significant relief to salaried individuals and pensioners, addressing long-standing demands for tax benefits.The tax relief measures impacted 4 crore salaried individuals and pensioners. The finance minister increased the income threshold for the zero-tax slab, ensuring a larger section of taxpayers pay no income tax. The standard deduction for salaried individuals was also increased. Another major announcement was the customs duty reduction on the precious metal, which was slashed from 15% to 6%.

Budget 2025 will be presented by Finance Minister Nirmala Sitharaman on Feb 1st, tentatively, and will likely reflect the government's focus on economic growth, fiscal consolidation, and welfare measures while looking at domestic challenges. The theme of the budget this year is 'Reinvigorating the Economy, Driving Reforms, and Prospering the Rakyat.

What to expect from Budget this year: Focus Areas

As we know, the global economy is struggling with inflationary pressures and geopolitical uncertainties. Budget 2025 is expected to focus on measures that boost domestic demand, strengthen exports, and also attract more foreign investment. The government may also introduce policies to promote industrial production and enhance India's position in global supply chains.

Infrastructure has been a key focus in recent budgets, and 2025 is expected to continue this trend with more funding for projects under the National Infrastructure Pipeline (NIP), smart cities, and the expansion of rail, road, and renewable energy infrastructure. Increased capital expenditure is vital to boost GDP growth and meet India's economic goals. A significant rise in infrastructure spending is needed to drive economic growth.

As per certain reports, the government is expected to announce incentives to further bolster the "Make in India" and "Atmanirbhar Bharat" initiatives. Specific measures to encourage sectors such as electronics, semiconductors, and renewable energy, along with the continuation of production-linked incentive (PLI) schemes, may be on the cards.

Other major expected announcements could include those regarding changes in income tax slabs, investments in agriculture, irrigation, and rural infrastructure to benefit farmers; increased allocation toward health infrastructure; and funding for renewable energy projects.

Budget 2025 Recommendations

For the Union Budget 2025 various sectors have shared their expectations and recommendations for the government's economic roadmap. The Retailers Association of India recommends that the government should consider the following key points to make the retail industry stronger and contribute to the GDP of the country.

Here are some key suggestions through RAI Pre-Budget Memorandum 2023-24:

• Boost Retail and Consumption: Retailing in India is one of the pillars of its economy and accounts for about 10 percent of its GDP. For retail sector to grow the Union Budget for FY 23-24 should focus on creating demand and instigating consumption by offering benefits or concessions in the form of lower taxes.The government should allocate a special fund and formulate a special trader finance scheme with SIDBI to help millions of independent retailers across the nation by declaring low-cost loans and relaxing some industry guidelines.

• Encourage Innovative and Convenient Digital Payment Methods: Digital payments in India are now a breeze, all thanks to UPI. Especially in semi-urban and rural India, the ease of transactions improved and reduced reliance on cash. To further promote digital adoption, the government should support new payment technologies and consider waivers or subsidies on MDR for debit card use.

• Consider Retail as a vital Service: The food and beverage retail sector should be viewed as a priority and vital service. Subsidies and advantages should be provided for land rates and other requirements like power. RAI further suggests that retail and wholesale traders be entitled for all benefits offered to other MSMEs.

• E-enablement of MSME retailers: Retailers in India need support to modernize, starting with POS machines to streamline billing and ensure secure cash management.

• Model Shops and Establishments Act: The Central Government introduced the Model Shops and Establishment Act in 2016, allowing shops to operate 24/7, which boosted employment and convenience for consumers. To further promote modernization, the government should encourage the adoption of electronic data capture (EDC) machines for digital payments, making it easier for retailers, especially small traders, to accept payments securely. The government could also subsidize the cost of these machines, helping retailers register under GST and transition to a fully accounted economy.

• Impact of Proposed GST Hike on Retail Sector: The proposed GST rate hike on premium products like apparel, footwear, and cosmetics could harm the formal retail sector, encourage unorganized trade, and hinder the Make in India initiative. To boost revenue, the government should adopt a balanced approach that supports formal retail and maintains consumer confidence.