“Modi Government Introduces Tax Cuts to Boost Economic Growth” India Unveils Tax Breaks and Business-Friendly Measures to Stimulate Growth in 2025 Budget
Modi 2025 Government Introduces Tax India’s government, led by Prime Minister Narendra Modi, has announced tax cuts for the middle class and measures to ease business operations, aiming to revitalize the economy amid a slowdown. The newly unveiled budget includes significant changes designed to boost demand among urban consumers, particularly Modi’s political base.
Finance Minister Nirmala Sitharaman revealed that the income tax threshold for middle-income earners would rise to Rs 1.2 million ($13,842) from Rs 700,000, alongside revisions to tax brackets. These changes are intended to put more disposable income in the hands of the middle class, fostering increased consumption, savings, and investment.
With the goal of reinvigorating India’s economy, the new budget also targets small and medium-sized businesses, offering support to improve the ease of doing business. Sitharaman assured that a new income tax bill would be introduced next week to complement these measures, aimed at stimulating growth and economic recovery.
These steps reflect Modi’s ongoing efforts to strengthen India’s position as the world’s fifth-largest economy and ensure political support ahead of upcoming elections.
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Among measures meant to make doing business easier, Sitharaman said a high-level committee for regulatory reforms that would review India’s rules, certifications, licences, and permissions governing business as well as the creation of an investment friendliness index of states, would be launched this year. “A light touch regulatory framework based on principles and trust will unleash productivity and employment,” Sitharaman said. Business groups have long urged India to reduce onerous paperwork and compliance burdens and reform the rules governing labour and land markets to stimulate investment and create jobs. “The focus of the budget has, basically, come in consumption via taxation cuts to support lower income and middle income segments of society, because that’s where the pain point has been very visible,” said Madhavi Arora, chief economist at Emkay Global Financial Services in Mumbai. India has bounced back since the Covid-19 pandemic and remains the world’s fastest-growing big economy, but GDP growth in the second fiscal quarter that ended in September was 5.4 per cent, the slowest in nearly two years. Despite strong infrastructure spending by the state, private investment has been sluggish and job creation weak. Inflation has been trending near the top of the Reserve Bank of India’s mandated band of 4-6 per cent, limiting its scope to cut lending rates. Vijayaraghavan Swaminathan, head of research at Avendus Spark Institutional Equities in Chennai, said the government’s intent in announcing the tax cuts was “very clear” and that they would give middle-class households “a breather”. In a special trading session on Saturday, India’s benchmark Nifty 50 blue-chip index fell 0.5 per cent, though consumer stocks were buoyed by Sitharaman’s moves to lower income tax pressures. “The market is confused as of now,” said Swaminathan. “A lot of numbers remain to be seen, including how the government is going to accommodate this tax collection hit.” In India’s annual Economic Survey, published by the government on Friday, the finance ministry painted a stark picture of the challenges faced by the youth and the economy. These included a reliance on China for supply chains serving critical industries such as solar power, advanced batteries and electric vehicles. The report, authored by Modi’s chief economic adviser V Anantha Nageswaran, also urged India’s central and state governments to “get out of the way” and deregulate the economy or face a “high risk of economic growth stagnation, if not economic stagnation”. The report forecast real GDP growth of 6.4 per cent for the current fiscal year, down from 8.2 per cent in 2023-4. The government is forecasting growth of 6.3 to 6.8 per cent in the coming 2025-6 fiscal year. Copyright The Financial Times Limited 2025. All rights reserved. Latest on Indian politics & policy
