Union Budget 2025: Key Expectations and Economic Outlook

Jan 31, 2025

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Explore the anticipated reforms and sectoral highlights in India's Union Budget 2025, addressing economic growth, fiscal policies, and key industry expectations.

Union Budget 2025: Key Expectations and Economic Outlook

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025 on February 1, 2025, at 11:00 AM IST. This budget is anticipated to address key economic challenges, including slowing growth, high inflation, and unemployment. Stakeholders are keenly awaiting potential reforms and incentives across various sectors.

Economic Growth Projections

The Economic Survey 2025-26 forecasts India's GDP growth between 6.3% and 6.8% for the upcoming fiscal year, attributing this to strong fundamentals, calibrated fiscal consolidation, and stable private consumption. However, risks such as geopolitical uncertainties and potential commodity price shocks remain.

Monetary Policy Outlook

A Reuters poll indicates that the Reserve Bank of India (RBI) may reduce its key policy rate to 6.25% on February 7, followed by another cut in the subsequent quarter. This move aims to stimulate the economy amidst slowing growth and persistent inflation.

Privatization and Public Investment

The government appears to be shifting its strategy from extensive privatization to investing in state-run enterprises. Plans include a $1.5 billion rescue package for two state-owned companies, signaling a focus on revitalizing public sector units to enhance profitability and generate dividend income.

Fiscal Discipline Amid Economic Challenges

Despite the economic slowdown, the government intends to adhere to its fiscal deficit target of 4.5% of GDP. This approach places greater responsibility on the RBI to support economic growth through monetary policy measures.

Sectoral Expectations

Various sectors anticipate targeted measures in the budget:

  • Infrastructure: Innovative funding methods and increased capital expenditure are expected to boost development.

  • Agriculture: Supportive policies and investments to enhance productivity and sustainability.

  • Micro, Small, and Medium Enterprises (MSMEs): Incentives and schemes to promote growth and competitiveness.

  • Education: Emphasis on digital learning infrastructure and skill development initiatives.

  • Healthcare: Focus on preventive healthcare and potential rationalization of GST on health products.

As the nation awaits the budget announcement, there is optimism that the proposed measures will address current economic challenges and set a course for sustainable growth.

Challenges Ahead

The government faces the challenge of balancing fiscal discipline with the need to stimulate a slowing economy. With GDP growth slowing to 5.4% from over 8% in the previous fiscal year, there is pressure to boost economic activity without exacerbating the fiscal deficit.

Conclusion

As the nation awaits the Union Budget 2025, stakeholders across various sectors are keen to see how the government addresses these expectations and challenges to foster sustainable economic growth.

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