Sunday 02 / February / 2025
The Union Budget 2025-26 is clearly designed to boost short-term consumption, with the decision to remove Income Tax on income up to ₹12 lakh standing out as a direct move to increase middle-class spending power. This is expected to stimulate demand, especially in sectors like real estate, retail, and automobiles, which benefit from increased disposable income.
It is commendable that FDI in the insurance sector will be raised from 74% to 100%, a move that will attract foreign capital, enhance competition, and drive innovation in the sector. Similarly, the decision to increase the TCS exemption limit for remittances under the RBI’s Liberalised Remittance Scheme from ₹7 lakh to ₹10 lakh will provide relief to individuals sending money abroad, particularly for travel and investment purposes. Additionally, the removal of TCS on remittances for education purposes when financed by an education loan is a positive step that will ease the financial burden on students studying abroad.
It is encouraging to see MSMEs receiving strong focus, rightly recognized as one of the key engines of India’s growth. Measures such as enhancing the credit guarantee cover, increasing investment and turnover limits, and boosting loans for export MSMEs will help bridge the credit gap and support expansion. However, while there was a lot of talk about financial sector reforms, the actual measures announced do not fully reflect this ambition. The revamped central KYC registry is a step in the right direction, emphasizing the need for regulatory frameworks to evolve with technological advancements. However, one hopes that more concrete steps will be announced soon to enhance financial sector resilience and growth.
Similarly, tourism—a major potential driver of job creation—deserved more attention. While the inclusion of hotels in the top 50 tourism destinations in the infrastructure list is a positive step, the sector as a whole requires stronger policy support and incentives to unlock its full potential.
Overall, this is a populist budget that provides welcome relief to the middle class and MSMEs but leaves room for stronger action in key areas. Hopefully, follow-up measures will address these gaps in the coming months.
