If you look at the customary picture taken before the Interim Budget was presented last February (on page 35), it is evident that crucial mandarins of that time-Finance Secretary T.V. Somanathan, Revenue Secretary Sanjay Malhotra, Financial Services Secretary Vivek Joshi, CBDT Chairman Nitin Gupta, and Minister of State Bhagwat Karad-are no longer in the team shaping Budget 2025-26.
Their successors, veterans in economic policymaking, are burning the midnight oil under Finance Minister Nirmala Sitharaman, set to present her eighth Budget, to craft a policy document that must address pressing economic realities. The task is complicated, as the Indian economy is grappling with a complex set of domestic and external circumstances.
Economic growth is projected to decelerate to a four-year low this fiscal, as highlighted by Surabhi in the lead story of this issue. Inflation remains stubbornly high, urban consumption is weak, and manufacturing growth has faltered. Private investment continues to languish, and increased job creation remains elusive. Meanwhile, the rupee has depreciated sharply, seemingly a calculated move to maintain export competitiveness at a time when the world faces the prospects of stiff, punitive tariff hikes by US President Donald Trump.
This precarious environment seems to have shaken corporate India’s confidence. The BT-C Fore Business Confidence Survey of 500 chief executive officers and chief financial officers for the October-December 2024 quarter reveals the weakest sentiment since April-June 2023.
Against this challenging backdrop, the government faces mounting expectations to reinvigorate the economy. A dominant public demand is for tax relief, particularly through rationalising income tax slabs and easing the standard deduction limits. The middle class, burdened by high goods and services tax rates, has also been vocal in its plea for relief.
Yet, the government’s stance remains unclear. As Teena Jain Kaushal notes, the new tax regime—with its lower rates but fewer deductions-has already been adopted by 72% of taxpayers in assessment year 2024-25. Will the government incentivise further adoption by sweetening the new regime, or will it offer concessions under the older system?
The Modi government’s dramatic corporate tax rate cut in 2019 aimed to spur private investment, but the pandemic derailed that. Now, the big question looms: Will Budget 2025-26 prioritise consumption, or will it stick to nudging taxpayers towards the new regime?
All eyes are on Prime Minister Narendra Modi’s government to deliver bold measures that can restore growth, boost business confidence, and respond to the aspirations of an anxious middle class. With the ruling Bharatiya Janata Party securing major state election victories in recent months without offering tax sops, there may be little political motivation to introduce significant tax rate cuts in the upcoming Budget.
While hopes are high, whether they will be met remains uncertain.