Finance Minister Nirmala Sitharaman will present her eighth budget since assuming office in 2019. (Photo source: Freepik)
1 year ago
Jan 23, 2025
The government will likely opt for both fiscal consolidation and growth supportive measures in the upcoming Union Budget 2025-2026, Nomura said. This budget will come at a time when consumption is weak, rupee is depreciating, and threats of higher tariff from the US under Donald Trump's second administration persist.
The budget could raise the customs duty on gold imports, since rising gold imports are weighing on the current account. Additionally, to encourage foreign capital inflows, it could increase the FDI limit in the insurance sector to 100% from the current 74%, according to Nomura.
"Allowing public sector companies to tap more overseas funding could also be announced," the brokerage reported.
To boost domestic manufacturing and attract global value chains to India, we expect a concessional corporate tax scheme for firms that use India as a hub for manufacturing, lower custom duties on intermediate inputs and higher import duties on products to counter China dumping, according to Nomura.
According to HSBC Global research, the PLI scheme succeeded in attracting investment in some high-tech sectors. "The budget should also focus on investment in mid-tech sectors, which are more labour intensive, and where FDI inflows have been week thus far," HSBC Global Research said.
"We expect the government to tweak the personal income tax slabs and focus on increasing disposable income for the middle class. The marginal propensity to consume tends to be higher for lower-income households and this can provide a fillip to consumption in the near term," said Nomura.
Nomura expects fiscal consolidation (4.8% of GDP in fiscal 2024-25, 4.4% in fiscal 2025-26), as well as more targetted measures to support growth.
"For the fiscal 2024-25, we believe the government is on track to achieve a deficit target of 4.8% of GDP, better than the budget estimate of 4.9% of GDP, aided by a sharp underspend in capex," the Brokerage said.
"For FY26, we expect the target to be set at 4.4% of GDP, in line with the medium-term commitment," Nomura said.
The government should simplify the customs duty structure by reducing slabs from over 40 to 5 and ensure that raw materials are taxed lower than finished goods in the forthcoming Budget to cut import bills, boost manufacturing and exports, think tank GTRI said.
Union Budget for the upcoming financial year will see provisions for a push to artificial intelligence, people with knowledge of the matter told NDTV Profit. A special policy package for AI is in the works, the sources said on Monday. The focus will be on AI-skilling schemes along with AI centres, they said.
A fresh Budget allocation could be made towards the policy package, with emphasis on policy measures to safeguard employment, the sources said.
Ahead of the Union Budget 2025, RS Subramanian, Senior Vice President, South Asia, DHL Express, emphasized the importance of reducing logistics costs by simplifying regulations and easing compliance to enhance India’s global competitiveness. Highlighting the government's focus on infrastructure development across various modes, he noted its critical role in driving economic growth and meeting growth expectations.
"This year, we see more push from the government to set up e-commerce export hubs that aim to support MSMEs as well. We look forward to collaborating further with the government to simplify tax structures and customs procedures for exporters. Sustainability is an emerging focus area for all businesses, especially in international trade, and we hope that we can collaborate on these aspects as well.”
R Doraiswamy, Managing Director of LIC, shared his expectations ahead of the Union Budget, emphasizing the importance of continued efforts to increase insurance penetration.
He noted that any government incentives towards savings or premiums could provide a significant boost to the industry. Highlighting the success of schemes like PMJAY, Doraiswamy expressed hope that announcements in the budget and regulatory amendments would support further growth in the insurance sector. He clarified that there are no ongoing discussions with the regulator regarding bancassurance.
The upcoming union budget on Feb. 1 is expected to provide additional budgetary allocation support for segments like solar rooftops, offshore wind energy and green hydrogen.
"The shift toward clean energy is no longer just a trend — it’s an urgent necessity. But this transition cannot happen overnight, and it certainly won’t be smooth without strong government support," said Sanjay Gupta, chief executive officer of Apollo Green Energy.
The Nuts and Dry Fruits Council of India on Wednesday urged the government to rationalise walnut import duty on a per-kilogram basis, reduce GST to 5%, and introduce a production-linked incentive scheme for the sector in its pre-budget proposals. India's dry fruits market is projected to hit $12 billion by 2029, growing at 18% CAGR, according to the industry body.
