A Budget That Makes Promises, But Can It Keep Them?

When Finance Minister Nirmala Sitharaman showed off the Union Budget 2025, people had high hopes. India finds itself at a key turning point—dealing with shaky world economies, fighting rising prices trying to create more jobs, and tackling growing gaps between rich and poor. The budget talks up careful spending, tax breaks, and building more stuff. But the big question still hangs in the air: Does it do enough to fix the deep-rooted problems that bug the Indian economy?

Fiscal Discipline vs. Growth – Walking a Tightrope

The government's pledge to cut the fiscal deficit to 4.4% of GDP from 4.8% deserves praise, but it brings risks. Tightening the budget at the cost of public spending can hold back growth when private money isn't flowing. With India's GDP set to grow 6.3–6.8%, the budget needed a stronger push to expand industry and create jobs. Instead, we see a careful almost shy approach—one that might please rating agencies but doesn't do much to boost spending at home.

Tax Breaks: A Popular Move That Might Cost Us

The government raised the tax-free income limit to Rs 1.2 million calling it a big win for middle-income earners. But this decision will cost Rs 1 lakh crore in direct tax money. We don't know if this will lead to more spending or if rising prices will eat up the extra cash. The government hopes people will spend more to boost the economy, but with food and fuel prices always changing, people might not have much extra to spend. What's more worrying is the lack of big changes in how companies are taxed. While people are happy about paying less tax, business leaders wanted clearer reasons to make things in India and sell them abroad. For India to compete, we need to make our industries more appealing for investment—and this budget doesn't do a great job at that.

Infrastructure Investment – A Silver Lining, But…

Rs 11.11 trillion of capital expenditure is a clear signal that the government wants to grow through infrastructure. Roads, railways and digital connectivity are the focus areas and these will create short term employment. However, execution, not allocation, is the problem. Large infrastructure budgets have not produced tangible benefits in India because of land acquisition problems, corruption, and bureaucratic hold-ups. Will things be different this time?

Furthermore, it is unclear from the budget how public-private partnerships (PPPs) will be reinforced to speed up infrastructure construction. Due to fiscal constraints, private funding is crucial, and the budget contains nothing that would reassure investors.

Agriculture and Rural Development – More of the Same

Even though about half of India's workforce is employed in agriculture, the industry still receives meager budgetary support. New incentives for high-yield crops and an increase in subsidized loan limits are incremental rather than revolutionary. Market access, post-harvest losses, and insufficient MSP (Minimum Support Price) support remain issues for farmers. In the absence of genuine agrarian changes, these financial allotments seem like temporary fixes.

Financial Sector Reforms – A Risky Bet on Foreign Capital

One of the more contentious budgetary decisions is raising the insurance industry's Foreign Direct Investment (FDI) cap to 100%. This could draw in foreign investment, but it also runs the risk of making a vital industry unduly reliant on outside parties. More significantly, there is a genuine risk that foreign insurers may put their own financial interests ahead of those of policyholders in the absence of strong regulatory monitoring.

Beyond general promises, the banking industry, which is currently dealing with bad loans and liquidity issues, receives little attention. The government's financial sector plan has significant gaps due to the absence of a defined roadmap on bank privatization, non-performing assets (NPAs), and fintech integration.

Make in India, But Where Are the Incentives?

Through the "Make in India" and "Atmanirbhar Bharat" programs, the government's commitment to manufacturing is still merely symbolic rather than real. There aren't many tangible steps to reduce regulatory costs or encourage domestic production, despite the National Manufacturing Mission's goal of increasing exports. Indian manufacturers still have to deal with high compliance costs, and they find it difficult to compete internationally in the absence of tax advantages or streamlined regulations.

The Verdict: A Budget That Plays It Safe

Prudent but uninspired, the 2025 budget is a mixed bag. Although infrastructure improvements and tax breaks are appreciated, they are insufficient to spur the significant structural changes India requires. When bold, innovative policymaking is desperately needed, the government appears to be satisfied with incrementalism.

Implementation will be the true test. Will projects involving infrastructure go beyond paper? Will tax reductions lead to an increase in consumption? Will the lack of local investment be made up for by FDI inflows? Budget 2025 will either be viewed as a squandered opportunity or as a turning point based on these unresolved questions.