Rai: Rai | A budget that understands balance

The middle class has been demanding income tax relief for a long time. Till now, tax gains were mainly targeted in the lower segments of the income pyramid, while in the middle and upper levels of the middle class they remained out of any significant relief. In fact, their tax burden increased due to changes in taxation of dividends, capital gains on equity, debt income, and more. Against this background, the Union Budget provides significant relief by re -making new tax structure, making an estimated revenue of ₹ 1 lakh crore. It stands as a major attraction of the budget.

Inflation has been continuously high, erasing domestic purchasing power. This concern when attached to investors has often been raised by FMCG companies. The budget effectively provides individuals with additional financial space, and the magnitude of tax relief is sufficient to stimulate the increase in consumption. Since these tax rates are expected to be implemented for some time, continuous increase in expenditure is positive news for companies of consumer goods.

Hurdle

India Inc., also, was looking for positive signs, traditionally through increased capital expenditure (CAPEX). The budget has restored the CAPEX outlay at the budget of ₹ 11.2 lakh crore of the FY25 budget. This target seems to be more attainable this year, as last year’s expenditure was forced by the election cycle, which delayed the expenditure decisions. Some argue that more could have been done, but it is necessary to identify that government spending is bound by revenue generated through taxes and other sources, complement by credit. Within these obstacles, the government has maximized its allocation – in the fact that the budget size of more than 25 has increased by 7.4%, which has reached ₹ 50.65 lakh crore. The government has created a good balance between revenue forgiveness and necessary expenditure.

This naturally brings fiscal deficit management into consideration. The government is committed in FY 26 to reduce the fiscal deficit by 4.5% and eventually up to 3%. The Covid-19 had increased deficit during the epidemic period, but has been systematically withdrawn. This is important to maintain a stable loan-to-GDP ratio. Each budget should be operated within the limits set by fiscal deficit targets, and should be align with the projection with a target of 4.4% this year, which borrowed a net borrow of Rs. 11.54 lakh crore for the last year. Was.

Liquidity factor

Borrowing program is particularly important as it affects the state of liquidity in the banking system. Currently, the liquidity is tight, with banks struggling to attract deposits between rising credit demand. If the government opted for high borrowing, it could be a further liquidity, which can create challenges for the central bank. Therefore, it was mandatory to maintain borrowings at a managerial level, which has been achieved. As a result, bond yields should remain stable, reducing market volatility.

The budget has also been preserved, if not increased, the allocation for major social welfare schemes, including subsidy, PM-farmers, PM-masks and NREGA. This ensures continuous financial assistance for economically weaker sections. These schemes have greatly improved the standard of living of low -income groups over the years, as reflected in domestic consumption surveys of the National Statistical Office.

Additionally, the budget introduces remarkable policy initiative, such as the Credit Guarantee Scheme for MSMEs and a push for the public-private participation (PPP) model in infrastructure financing. The NABFID (National Bank for Financing Infrastructure and Development) will play an important role in providing credit enhancements for infrastructure projects, which will improve its credit ratings, in turn, and facilitates better access to the corporate bond market. Another significant improvement is proposed to allow 100% FDI in insurance, with the condition that the premium should be invested within India. These measures take important steps in meeting regional needs and promoting economic growth.

A particularly interesting step is reduced in tariff rates, indicating India’s commitment to rationalize customs. At a time when global trade tension is increasing, with the test of tariffs imposed by various countries, this step may stand in India in the global trade scenario.

Overall, the budget is not only practical, but also optimizes the results on both revenue and expenditure fronts. It is forwarded, extending beyond FY26 for laying groundwork for the next five years. The broader goal is to speed up the development of India towards India, ensure that development has accelerated.

(The author is the chief economist of Bank of Baroda and author of Corporate Quirks: The Darkar Side of the Sun Views are personal)

Disclaimer: These are the personal opinions of the author