Bhopal (Madhya Pradesh): Finance Minister Nirmala Sitharaman is scheduled to present the union budget 2025-26 on February 1, 2025, marking her eighth consecutive budget presentation.

The union budget for 2025-26 comes amidst a unique confluence of opportunities and challenges, influenced by domestic priorities and global economic trends.

India's GDP growth continues to remain one of the highest globally, providing a favourable backdrop for the government to invest in critical areas such as infrastructure, healthcare, education, and digital initiatives. This robust growth creates a platform for the finance minister to craft a visionary budget that propels India towards its goal of becoming a developed nation by 2047. 

The finance minister’s previous budget maintained a record capital investment of ?11.11 trillion, aimed at sustaining economic growth and ensuring that India remains the world's fastest-growing large economy, with an estimated growth rate of 6.5% to 7% for the current fiscal year. This momentum offers a fiscal space to prioritise capital expenditure, essential for placing the economy on a high-growth trajectory.

Additionally, India's improving fiscal position, driven by healthy tax collections—both direct and indirect—provides room for manoeuvring. A fiscal deficit well below budget estimates allows for greater investments without jeopardising fiscal discipline. Geopolitical dynamics, including US-China trade tensions and the ongoing Ukraine conflict, have elevated India's stature as an attractive investment destination.

Policies aimed at enhancing the inflow of foreign direct investment (FDI) and boosting local manufacturing could further solidify India’s position as a global economic powerhouse. Taxpayers are hopeful for relief in the upcoming budget. Inflation in these years has put lots of pressure on purchasing power, especially for the middle-income group families. They thus need some relaxation in income tax.

Raising the basic exemption limit under the new tax regime from ?3 lakh to ?5 lakh, increasing Section 80C deduction limit from ?1.5 lakh to ?2 lakh, and enhancing the deduction for interest on home loans under Section 24(b) from ?2 lakh to ?3 lakh can give some relief to this group which was ignored in all the budgets. This group has the potential to boost the demand needed for growth. These changes will help to alleviate the tax burden on individuals, stimulate consumer spending, and encourage savings for capital formation. Despite these opportunities, the finance minister faces significant challenges. With the government’s reliance on coalition partners such as the Telugu Desam Party and Janata Dal (United), navigating political dynamics will be critical.

Moreover, the upcoming Delhi Vidhan Sabha elections may pressure the government to adopt a populist approach, including incorporating welfare-oriented measures and free schemes. The BJP’s Sankalp Patra for the Delhi elections has already promised several welfare initiatives, indicating a potential tilt towards a more populist budget. Balancing the competing demands of fiscal discipline and growth-oriented spending will be a formidable task.

This balancing act is further complicated by ongoing geopolitical uncertainties, such as Middle East tensions and energy security concerns, which could influence oil prices and trade dynamics. The union budget 2025-26 thus presents a pivotal opportunity for the finance minister to cement the economic trajectory while addressing immediate challenges.

By striking the right balance between growth and welfare, and leveraging its robust economic fundamentals, the government can set the stage for sustainable and inclusive development.