The Union Budget 2025 is all set to be presented by the Finance Minister Nirmala Sitharaman on 1st February 2025. It arrives at a time when India faces the dual challenge of addressing immediate economic pressures and introducing actionable solutions towards sustainable growth. Rising prices, employment generation, infrastructure bottlenecks, and global trade competitiveness are some of the pressing issues. This blog will discuss Union Budget 2025 expectations in terms of inflation, employment, infrastructural growth, and more.
Here’s a look at possible Union Budget 2025 expectations –
1. Combating Inflation with Targeted Schemes
Inflation remains one of the biggest challenges for households, with food prices being a key driver. Vegetable prices, for instance, surged by an alarming 42% in late 2024*, leaving families struggling to balance their monthly budgets. Addressing this requires both immediate relief and long-term strategies.
However, since food inflation is majorly supply-driven and not demand-driven, the government aims to address it accordingly. The government is expected to expand Direct Benefit Transfers (DBTs) and food subsidies to shield the most vulnerable sections of society from rising costs. At the same time, structural reforms in agriculture, such as increasing investments in cold storage facilities, strengthening rural supply chains, and expanding digital platforms like eNAM, are crucial. These initiatives from Union Budget 2025 expectations aim to cut post-harvest losses and stabilize prices, ensuring a reliable supply of affordable food throughout the year.
2. Generating Employment and Bridging Skill Gaps
India’s labor market has shown resilience, but the challenge lies in creating jobs that align with evolving industry needs. For instance, while MSMEs have seen credit growth of over 13%** in the past year, many still report skill shortages, particularly in labor-intensive sectors like textiles, food processing, and electronics manufacturing.
The budget could introduce sector-specific incentives to drive job creation in these industries while promoting upskilling initiatives. The need for this is coming from expanding apprenticeships and collaborations between educational institutions and businesses that ensure workers are equipped for emerging opportunities. Practical measures, such as increasing funding for vocational training and providing financial assistance to employers for skill-building programs, will be pivotal in closing the workforce gap and boosting productivity is addressed by the finance minister.
3. Infrastructure Development to Drive Economic Growth
India’s infrastructure spending has consistently increased, with a 28.4% rise in FY24 and a projected 17% increase in FY25***. Despite this, connectivity gaps and logistical inefficiencies persist, especially in rural and semi-urban areas.
To address this, the government is likely to prioritize multi-modal logistics parks, expanding the road and rail network, and modernizing urban infrastructure. Another agenda for the union budget this time could be investments in digital infrastructure, including expanding internet access in rural regions, are also critical for bridging the urban-rural divide. In addition, healthcare and education infrastructure, particularly in underserved areas that, need immediate attention to ensure convenient access to essential services could be a point of discussion this time.
4. Strengthening Export Competitiveness
India’s goal of reaching $2 trillion in exports by 2030 hinges on reducing trade costs and boosting the efficiency of exporters. However, global uncertainties, including fluctuating demand and rising tariffs, pose significant challenges.
The budget is expected to extend initiatives like the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme and interest equalization programs for MSMEs. Simplifying export compliance procedures, particularly for smaller players, will also help streamline operations. Additionally, another expectation is addition of incentives for high-value exports, including electronics, pharmaceuticals, and precision machinery that pave the path for, India’s competitiveness in global markets.
5. Promoting Sustainable and Green Growth
India’s commitments to achieving net-zero emissions by 2070 demand accelerated efforts in renewable energy and climate-resilient infrastructure. The steel sector, for example, has sought ₹14,000 crore in allocations to adopt low-carbon technologies****, highlighting the pressing need for industry-specific support.
The budget could build on these initiatives by expanding subsidies for electric vehicle (EV) manufacturing and reducing GST on EV components. Additionally discussions on expanding targeted funding for renewable energy projects, such as solar and wind power is expected.
6. Simplifying Indirect Taxation to Drive Compliance
India’s GST system has unified indirect taxation, but certain inefficiencies persist. Industries such as electric vehicles (EVs) and renewable energy face challenges due to the inverted duty structure, which strains cash flows and increases costs. Similarly, small businesses often struggle with complex compliance processes, limiting their ability to scale efficiently.
Indirect taxation reforms could be a focal point of discussion at Union budget 2025. MSME’s and corporations expect government to proactively address these inefficiencies.
What could be discussed –
- Rationalizing GST rates for key sectors, including a likely reduction of GST on EV components from 28% to a more practical 5-12%.
- Additionally, we might see Finance and Union Minister Nirmala Sitharaman expanding the scope of Input Tax Credit (ITC) refunds for capital goods in emerging industries such as green energy can stimulate investments.
- On the compliance front, we can expect talks on extending the reach of digitized systems, such as e-invoicing and Invoice Management System (IMS) that will help streamline operations and improve transparency.
These measures aim to reduce litigation, improve industry cash flow, and support India’s transition to a green economy while simplifying tax compliance for businesses of all sizes.
7. Reforming Direct Taxation for Growth
India’s direct tax system has made significant improvements in recent years, but there remains room for improvement to better support taxpayers and businesses. Union budget 2025 tax reforms expectations include addressing the same. Middle-income earners still face a high effective tax burden, while industries require targeted incentives to promote innovation and investment.
The income tax union budget can offer relief by raising the exemption limit under the new tax regime from ₹3 lakh to ₹5 lakh and extending the 100% rebate for incomes up to ₹10 lakh. This will boost disposable incomes for middle-class households. Direct Tax Code provisions also target streamlined tax regimes, simplified compliance, and fewer slabs.
For businesses, reintroducing weighted deductions for R&D expenses and expanding the patent box regime to include copyrights, designs, and trademarks could introduce innovation across sectors.
Further, providing clarity on the taxation of contingent consideration in share transfers and tax-neutral treatment for intra-group reorganizations would align India’s policies with global practices. These steps in the income tax union budget will reduce disputes, enhance compliance, and attract foreign investments, setting a strong foundation for sustainable growth.
A Practical Vision for 2025 and Beyond
The Union Budget 2025 has the potential to transform challenges into opportunities by addressing inflation, unemployment, and infrastructure bottlenecks with targeted, data-driven solutions. By focusing on sustainable growth and simplifying tax structures, the government can pave the way for a resilient and inclusive economy.
While the expectations are high, the success of this budget will lie in its ability to translate policies into tangible outcomes for individuals and businesses, ensuring progress at every level of society.
- ****: Govt rolling out Rs 15,000 crore roadmap to help steel industry cut carbon emissions – DD India
