Indian Prime Minister Narendra Modi’s government unveiled its annual budget on Saturday, introducing tax cuts to benefit the salaried middle class while prioritising economic growth through investments in agriculture and manufacturing.
Finance Minister Nirmala Sitharaman, in her budget speech, emphasised the government's commitment to boosting private investment, strengthening agriculture, and enhancing the spending power of middle-class citizens.
“The budget aims to take everyone forward on an inclusive path,” Sitharaman said, adding that the government targets a fiscal deficit of 4.4% of GDP for the 2025-26 financial year.
India, the world’s fifth-largest economy, is projected to experience its slowest growth in four years due to sluggish manufacturing, persistent food inflation, stagnant job creation, and weak urban consumption. A report released Friday by the country’s chief economic advisor estimated GDP growth of 6.3% to 6.8% in the next fiscal year.
The government announced major tax reforms, including an increase in the income tax exemption threshold from $8,074 to $14,800. Sitharaman said a new income tax bill will be introduced next week to further ease the tax burden on middle-class earners.
“The revised tax structure will significantly reduce liabilities for middle-class households, boosting disposable income, savings, and investment,” she said.
Modi’s government has been under pressure to address middle-class concerns and generate jobs to sustain growth.
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Economists had recommended tax cuts and employment programs to counter rising unemployment, with youth joblessness reaching 7.5% in January, according to the Center for Monitoring the Indian Economy.
To enhance agricultural productivity, the government will launch a nationwide initiative promoting high-yielding crops, with a focus on pulses and cotton. The plan aims to benefit at least 17 million farmers, increasing their subsidized credit limit from $3,460 to $5,767.
Additionally, the budget includes measures to formally register gig workers, ensuring better access to healthcare and welfare programs. The government will issue identity cards and maintain a national registry for gig workers, a sector expected to employ over 23 million people by 2030, according to estimates from government think tank NITI Aayog.
The budget also introduced a new startup fund to drive innovation in collaboration with the private sector. Further investments will support manufacturing and exports, with a long-term goal of increasing manufacturing’s share in the economy from 17% to 25%.
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In an effort to create tourism-driven employment, the government will allocate more funds to improve infrastructure and connectivity in key states.
Sitharaman also announced a Nuclear Energy Mission, targeting 100 GW of nuclear power capacity by 2047 as part of India’s clean energy transition.