Budget 2025: Key Expectations And Blueprint For India’s Growth

India's budget 2025 is expected to prioritise critical sectors, including defence, roads, railways, airports, and water infrastructure. Additionally, the government is expected to address the availability of long-term funding. In this blog, we will explore what the key expectations are from Budget 2025 and how it aims to shape India's future.

Overview Of Budget 2025

The annual Union Budget presentation by the Finance Minister to Parliament is one of the most anticipated economic events. It serves as the government's blueprint for revenue and expenditure strategies, focusing on driving growth and addressing national priorities while providing insights into the country's financial health and developmental trajectory.

The Union Budget 2025, set to be presented by Finance Minister Nirmala Sitharaman on February 1, 2025, will be the 2nd budget of the current government's third term. It will also mark her eighth consecutive budget presentation, highlighting her pivotal role in shaping India's economic landscape.

Revenue Generation Strategies

Government revenues encompass income streams like taxes and non-tax sources such as fees, fines, tolls, and earnings from state-owned enterprises. These funds are crucial for running national services, ensuring financial sustainability and managing resources equitably. Key revenue generation strategies for the government are as follows:

1. Tax Policies And Reforms

Tax policies and reforms are at the heart of how a government raises money. Adjustments in the tax rates can greatly impact revenue. Currently,  India’s existing tax system under the simplified regime includes multiple brackets, ranging from 5% to 30%, making it complex to manage. 

Authorities are expected to focus on improving this system by merging the tax rates into broader categories. A feasible solution would be to cut down the number of tax slabs to three: 10%, 20%, and 30%, removing the middle rates¹. 

Budget 2025 is also expected to increase the standard deduction from INR 75,000 to INR 1,50,000, providing significant tax relief for individuals¹. This adjustment will help taxpayers manage rising living costs, boost disposable income, and potentially stimulate economic spending by enabling citizens to retain more savings.

2. Non-Tax Revenue Sources

Non-tax revenue sources, such as fees, fines, or income generated from public services and state-owned enterprises are another important part of government funding. Examples include governments charging for licenses, highway tolls, or collecting revenue from state-owned enterprises. 

In India toll collection is projected to surpass INR 70,000 crore in 2024, driven by increased daily toll collections, the establishment of new toll plazas, and a robust economic recovery². Non-tax revenue sources, such as toll collections, play a significant role in financing infrastructure projects and maintaining economic momentum.

3. Impact Of Economic Activities

The government collects revenues through tax and non-tax strategies, allocating funds to capital expenditures for infrastructure development and long-term asset investment. 

Following the budget, the Reserve Bank of India (RBI) is expected to implement measures to improve the economic rates. The RBI will have a meeting in February 2025, after the budget, where they might lower the repo rate and reduce the cash reserve ratio to 4%³. These changes are meant to enhance economic liquidity, keep prices steady, and help the economy grow, working together with India’s budget plans.

Expenditure Priorities

Budget expenditure priorities focus on allocating resources to key sectors that drive economic growth and improve public welfare. Properly setting these priorities ensures the government addresses urgent needs while enhancing long-term development. The expenditure priorities for the upcoming budget 2025 are as follows:

1. Social Welfare And Public Services

The upcoming budget is expected to drive agricultural self-reliance through a strategic INR 1.7 lakh crore investment⁴. This will focus on:

• Expanding the PM-Kisan support 
• Enhancing irrigation infrastructure 
• Modernising cold storage systems 
• Promoting ethanol and biofuels production 
• Advancing Make in India and Production Linked Incentive (PLI) 
• Developing infrastructure. 

2. Infrastructure Development

The rapid urbanisation and population growth necessitate massive investments in transport, roads, airports, railways, power, and other fields in the country. This will consequently enhance trade in the respective sectors. The state's efforts are concentrated on increasing the country's national highway network.

• The Budget 2024-2025 allocated INR 11.11 lakh crore to the infrastructure sector, representing 3.4% of GDP and marking an 11% increase from the previous year. This year, infrastructure allocation is expected to rise approximately 12%, reaching INR 12.5 lakh crore⁵.
• Along with that, India has an ambitious target to turn towards renewable energy with a target of reaching around 500 GW by the year 2030⁶. To meet this goal, the government is expected to spend extensively on the renewable energy segment.
• For railways, it is expected that the government will focus on the deployment of 12,000 Horse Power Electric Locomotives. It will also focus on safety and technology with the Kavach System and electrification of railways. Accordingly, the railway budget is expected to grow significantly by 15%-20%, reaching INR 2.8 lakh crore⁷.

3. Defence And National Security

India is the fourth-largest defence spender across the globe⁹. It faces multiple geographical challenges and geopolitical tensions. Which further mandates the need for a strong defence system.

In the previous budget, defence received INR 6.22 lakh crore, a 4.79% increase from the prior year¹⁰. This year's capital expenditure is expected to reach INR 1.9 lakh crore, focusing on military vehicle modernisation and strengthening the army and navy¹¹. The strategic goal is to reduce India's current 35% dependence on defence imports by boosting domestic capabilities¹².

Expected Challenges And Concerns

Balancing a national budget is a multifaceted task, influenced by both domestic and global factors. Economic pressures, political considerations, and external global influences often create complexities in fiscal decision-making. For finance minister Nirmala Sitharaman, the following are expected challenges and concerns for the 2025 Union Budget.

1. Balancing The Budget Amid Economic Pressures

With India facing inflation at 5.22% in December 2024 and crude oil prices at $80 per barrel, balancing economic budgets becomes significantly challenging^13,14. These factors compel policymakers to make difficult decisions about spending cuts and potential tax adjustments to maintain economic stability.

Moreover, external economic crises, such as a global recession or Middle East war tensions, can break the growth projection, making it hard to have a balanced budget without sacrificing key public services or investments.

2. Political Considerations

Political considerations are critical in economic decision-making, and they often influence budget priorities and resource allocation. Conflicts over fiscal policies arise due to differing political ideologies, party agendas, or lobbying on taxation and government spending.

Elected officials may make decisions that align with voter preferences or campaign promises, even if they are not fiscally optimal. Political gridlock can also prevent the approval of critical budgetary measures, thus impeding progress on important economic reforms or crisis responses.

3. Global Economic Influences

Global economic and trade dynamics greatly impact India’s economy. In January 2025, the Indian rupee hit an unprecedented low of INR 86 against the US dollar¹⁵. 

This depreciation escalates import costs and inflationary pressures, potentially hindering the country's economic growth. Trade policy changes such as Trump's tariffs and disruptions in global supply chains, further complicate international economic interactions.

4. Stock Market Impact

Indian stock market is observing a downward trend in 2025. The upcoming Union Budget 2025 also promises preferable measures for the stock market. These measures include cutting down the taxes from stock market benefits, incentives for specific industries and policies that will make India more attractive to domestic as well as foreign investors. It is expected that Union Budget 2025 will bring a positive impact on the stock market and the downward trend will stop after the budget is presented.

Also Read: Market Economy Vs. Planned Economy- Understanding The Key Differences

Conclusion

The Union Budget is a crucial tool for deciding the distribution of resources for public welfare, infrastructure, and social development. Further highlighting the focus areas of the government and their measures to bring growth, lower fiscal deficits, and cater to all sectors from health care to education. While its immediate impact may vary across different segments of society, a well-planned budget could create long-term benefits in terms of economic stability and provide a roadmap for national progress. To learn more about the Indian economy and investment opportunities sign - up on Grip Invest today.

Frequently Asked Questions On Budget 2025

1. What is the primary goal of the Budget 2025?

The primary goal of the Union Budget 2025 is to boost economic growth by investing in important areas. The budget will aim to make taxes simpler and encourage businesses to grow. It will also focus on sustainability and green technologies to create a better future.

2. What to expect in the budget 2025 in India?

The Union Budget 2025 will be designed with a strong thrust on growth with big capital expenditures in infrastructure, defence, digital advancement, and social welfare. Increased scale and reach of PLI-type initiatives will likely see an uptick in private CAPEX. Infrastructure spending to support jobs, and social welfare for sustained growth.

3. What will be the new income tax slab?

The Union Budget 2025-2026 is expected to bring drastic changes to the new tax regime. Annual income up to INR 10 lakh could be declared tax-free, and a new tax slab of 25% could be added for income between INR 15 lakh and INR 20 lakh. These are a few expectations from the budget income tax.

References

1. CNBC TV18, accessed from: https://www.cnbctv18.com/budget/budget-2025-personal-tax-reforms-expectations-for-individual-taxpayers-deloitte-india-19544939.htm
2. The Economic Times, accessed from: https://economictimes.indiatimes.com/news/economy/finance/toll-mopup-may-top-rs-70000-cr-in-2024/articleshow/116692321.cms?from=mdr
3. Business Standard, accessed from: https://www.business-standard.com/finance/news/rbi-slashes-cash-reserve-ratio-to-4-what-it-means-for-banks-and-you-124120600400_1.html
4. The Economic Times, accessed from: https://economictimes.indiatimes.com/markets/stocks/news/budget-2025-asit-c-mehtas-key-expectations-for-investors-in-these-10-sectors/agriculture/slideshow/117445982.cms
5. India TV, accessed from: https://www.indiatvnews.com/business/budget/union-budget-2025-what-to-expect-for-infrastructure-in-upcoming-budget-know-anticipated-capital-outlay-2025-01-22-972575#:~:text=Following%20the%20trend%20of%20giant,least%20Rs%2012.5%20lakh%20crore
6. IBEF, accessed from: https://www.ibef.org/news/india-eyes-500-gw-renewable-power-by-2030#:~:text=India%20has%20unveiled%20its%20National,net%2Dzero%20emissions%20by%202070
7. ET Now, accessed from: https://www.ibef.org/news/india-eyes-500-gw-renewable-power-by-2030#:~:text=India%20has%20unveiled%20its%20National,net%2Dzero%20emissions%20by%202070
8. IBEF, accessed from: https://www.ibef.org/news/india-eyes-500-gw-renewable-power-by-2030#:~:text=India%20has%20unveiled%20its%20National,net%2Dzero%20emissions%20by%202070
9. The Economic Times, accessed from: https://economictimes.indiatimes.com/news/defence/india-fourth-largest-military-spender-overall-global-spending-accelerates/articleshow/109493488.cms?from=mdr
10. News 18, accessed from: https://economictimes.indiatimes.com/news/defence/india-fourth-largest-military-spender-overall-global-spending-accelerates/articleshow/109493488.cms?from=mdr
11. Money Control, accessed from: https://www.moneycontrol.com/budget/budget-2025-expectations-live-news-updates-fm-nirmala-sitharaman-income-tax-reforms-tax-slabs-january-22-liveblog-12916503.html
12. India TV, accessed from: https://www.indiatvnews.com/business/budget/budget-2025-how-much-hike-can-be-expected-in-defense-allocation-and-where-will-the-focus-lie-check-experts-predictions-nirmala-sitharaman-february-1-2025-01-20-972127#:~:text=Despite%20being%20the%204th%20highest,government's%20'Aatmanirbhar%20Bharat'%20initiative
13. Ministry of Statistics and Programme Implementation, accessed from: https://www.mospi.gov.in/sites/default/files/press_release/CPI_PR_13Jan25.pdf
14. The Hindu Businessline, accessed from: https://www.thehindubusinessline.com/markets/commodities/brent-crude-trades-above-80-a-barrel-as-trump-decides-to-boost-us-production/article69122285.ece
15. The Indian Express, accessed from: https://indianexpress.com/article/explained/explained-economics/rupee-us-dollar-weak-fii-inflows-9775948/

Want to stay at the top of your finances? 

Join the community of 4 lakh+ investors and learn more about Grip Invest, the latest financial knick-knacks, and shenanigans in the world of investing.

Happy Investing!

Disclaimer - Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading.
This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for consequences of any actions taken based on the information provided. For more details, please visit www.gripinvest.in

Registered Address - 106, II F, New Asiatic Building, H Block, Connaught Place, New Delhi 110001