In her Union Budget 2025 speech, Union Finance Minister Nirmala Sitharaman made a series of announcements aimed at spurring economic growth, easing the tax burden on middle-class families, and incentivizing investment in key sectors. One of the most impactful announcements was the decision to exempt individuals earning up to Rs 12 lakh annually from paying income tax. This move is designed to provide substantial relief to salaried employees, who make up a large portion of the Indian taxpayer base. By reducing the tax burden, the government aims to put more disposable income in the hands of the middle class, encouraging consumer spending, and thus contributing to overall economic growth.
Additionally, the Finance Minister introduced a series of customs rate cuts aimed at making several critical goods cheaper. These rate reductions were welcomed by industries reliant on imported raw materials, including those in the electronics, healthcare, and energy sectors. Among the most significant cuts were those related to mobile phone chargers, certain cancer drugs, and key raw materials like cobalt and lithium-ion battery scraps. These cuts are part of a broader effort to reduce the cost of manufacturing in India and promote domestic production, particularly in the electronics and renewable energy sectors.
Sitharaman also announced reductions in basic customs duties (BCD) for several other items, including gold, silver, and platinum. Specifically, the BCD on gold and silver was reduced to 6%, and the BCD on platinum was lowered to 6.4%. This reduction is likely to impact consumers, particularly in the jewelry and luxury goods markets, making these precious metals more affordable for investors and buyers alike.
In a bid to support India’s growing electric vehicle (EV) industry, the government introduced several provisions to make EV manufacturing more attractive. The Finance Minister proposed expanding the list of exempted goods for EV battery manufacturing, adding 35 additional items to this list. Similarly, 28 more items for mobile phone battery manufacturing were also included in the exemption list. These measures are designed to reduce the cost of production for EV and mobile phone manufacturers, which should, in turn, lower prices for consumers and help make electric vehicles more affordable for the average buyer.
The government also took steps to stimulate the leather and footwear industries, which play a crucial role in India’s manufacturing sector. The BCD exemptions on wet blue and crust leather imports are expected to reduce costs for manufacturers in these sectors, ultimately benefiting consumers by lowering the price of leather goods such as jackets, shoes, belts, and purses. The government also proposed a new scheme to help the leather and footwear industries expand, with the goal of creating 2.2 million jobs and generating Rs 4 lakh crore in revenue. These measures reflect the government's push to foster job creation in sectors that employ a significant portion of the population, particularly in the informal and semi-formal sectors.
The government’s focus on healthcare was also evident in the proposed customs duty reductions for life-saving drugs used to treat cancer and chronic diseases. Thirty-six essential drugs will now be fully exempt from basic customs duties, which will make these medicines more affordable and accessible to patients. This move is seen as a direct effort to ease the financial burden on people with chronic health conditions and cancer, ensuring that life-saving treatments are within reach for a larger number of Indians.
Further, the reduction in customs duties on frozen fish paste (surimi) from 30% to 5% is aimed at promoting the export of processed seafood products, benefiting the fishing and export industries. The government is also promoting the shipbuilding industry by exempting raw materials required for ship manufacturing from BCD for the next 10 years. This long-term exemption is expected to stimulate growth in the maritime sector and enhance India’s capacity for ship production and exports.
On the other hand, there were also some provisions that would make certain goods more expensive. The increase in the BCD on flat-panel displays from 10% to 20% will directly affect the price of televisions and mobile phones. This could potentially raise the cost of electronics for consumers, though the exact impact will depend on various factors, including the brand and model of the devices in question. Furthermore, the removal of exemptions on 82 tariff lines for social welfare surcharges is another change that could increase the cost of certain products, though the government has emphasized that these measures are necessary to meet its fiscal objectives.
As Sitharaman presented her eighth consecutive Budget, she took the opportunity to emphasize that the government’s priorities would be to focus on the welfare of marginalized sections of society, including the poor (garib), farmers (annadata), youth, and women. She highlighted that the next five years represent a unique opportunity to foster balanced and inclusive growth for all segments of the population. The Finance Minister pointed out that the development measures proposed in this budget would be aimed at ensuring “sabka vikas” (growth for all), an overarching vision that aims to include everyone, regardless of socio-economic status, in the country’s growth story.
The measures laid out in the Union Budget 2025 are not just about providing immediate relief but are also designed to create long-term economic benefits. For instance, the tax exemptions and duty reductions on raw materials like cobalt and lithium-ion batteries will help promote India’s domestic manufacturing capabilities, reducing the country’s reliance on imports and boosting exports. These moves are expected to bolster sectors like renewable energy, electric vehicles, and electronics, making India a more competitive player in these growing industries on the global stage.
Moreover, Sitharaman’s focus on healthcare and the reduction in customs duties on essential medicines reflects the government’s continued commitment to improving the healthcare infrastructure in the country. By making life-saving drugs more affordable and accessible, the government is aiming to ease the financial burden on individuals suffering from chronic health conditions and reduce out-of-pocket expenses for the common man.
This Union Budget is the second full budget under the Modi 3.0 government, which returned to power in the 2024 Lok Sabha elections. Sitharaman’s proposals mark a shift towards ensuring that economic growth is not just a benefit for the affluent but reaches all corners of society. By prioritizing job creation, boosting consumption, and reducing tax liabilities, the government has outlined a roadmap for achieving inclusive growth in the coming years.
In conclusion, the Union Budget 2025 is a balanced approach to addressing India’s immediate economic challenges while positioning the country for long-term growth and development. Through measures aimed at easing the tax burden on salaried employees, promoting domestic manufacturing, and ensuring the welfare of marginalized sections of society, the government has crafted a budget that attempts to strike a balance between fiscal prudence and social welfare. The success of these proposals will ultimately depend on their implementation and the broader economic conditions in the years to come.
