Union Budget 2025-26 is approaching, and industry stakeholders, experts, and economists are seeking new changes and announcements from FM (Finance Minister) Nirmala Sitharaman. Nomura, a global financial services group, predicts a blend of fiscal consolidation and growth-oriented measures in the new budget.
This budget comes at a time when economic momentum isn’t good, the rupee is weakening, and geopolitical uncertainties are constantly there. Due to all this, FM will likely introduce measures to boost infrastructure in agriculture, MSMEs and other critical sectors. She will also empower the economy with capex (capital expenditure) growth and consumption support.
5 Major Policy Changes to Expect
Nomura highlights 5 key changes to expect in policy:
1- Tweak Personal Income Tax Slabs to Boost Consumption
Revisions in personal income tax slabs are expected to increase disposable income for the middle class. People with lower-income groups and a higher consumption propensity could lead to near-term demand. This will be crucial to the government’s focus on stimulating consumption amid weak demand. Previously, the government introduced PAN 2.0 to help taxpayers.
2- Public Capex Growth Targeted at 12.5% YoY in FY26
Capital expenditure might grow by 12.5% YoY in FY26, supporting the government’s medium-term fiscal commitments. Capex for FY25 can witness a small drop, but the administration will continue to aim for infrastructure-led growth. Nomura also forecasts that gross market borrowing will rise from ₹14 lakh crore in FY25 to ₹14.4 lakh crore in FY26.
3- Concessional Corporate Tax Rate
The government is expected to announce a concessional corporate tax plan to position India as a manufacturing hub. Lower customs duties on intermediate inputs and higher import duties on finished products to counter China’s dumping practices are expected.
4- Boosting Agriculture and Rural Income
Nomura expects higher investment in agriculture to boost productivity, enhance exports, and increase rural incomes. It’s pretty obvious because agriculture contributes 17% to India’s GDP and requires reforms. Since FY20, the agricultural budget has seen a fixed 5.4% CAGR for the farmers welfare department at ₹1.32 lakh crore.
5- Focus on Foreign Investment and Rupee Stability
The last change Nomura expects is a hike in customs duty on gold imports to put a brake on rising imports, affecting the current account deficit. Increasing the FDI (Foreign Direct Investment) limit in the insurance sector from 74% to 100% might also attract foreign capital. In combination with public sector entities, accessing overseas funding will bolster capital inflows and stabilise the rupee.
Budget 2025 will be Nirmala Sitaraman’s 8th budget. The halwa ceremony took place last week, after which budget-making officials have gone quarantined to avoid leaks. Nirmala Sitaraman will present the new budget plan on Saturday, February 1, 2025.
