Budget 2025: The upcoming Union Budget 2025-2026 comes against a backdrop of subdued economic momentum, a weakening rupee, and heightened global geopolitical uncertainties, particularly with the Donald Trump-led US administration.
However, market expectations from the Budget 2025 are high, amid hopes for bold and strategic measures.
As the Union Budget 2025-26 nears, economic priorities are under the spotlight, with Motilal Oswal Financial Services outlining critical reforms to address India’s slowing domestic growth, rising welfare expenditures, and the need for sustained capital investments.
Motilal Oswal identifies five key focus areas for the Budget:
Motilal Oswal suggests linking capex loans to state performance metrics, including capex achievements and the welfare-to-capex ratio. States with higher welfare expenditures, such as monthly stipends, should be scrutinized to ensure fiscal responsibility. This targeted approach aims to address the anticipated ₹1 lakh crore capex shortfall for FY25 while incentivizing efficiency in public spending.
Simplifying tax structures remains a priority. With indirect taxes forming 60% of total receipts, rationalizing GST slabs could ease financial burdens on households and boost disposable incomes. Motilal Oswal also advocates for reforming dividend taxation in Budget 2025, proposing measures to avoid double taxation and provide relief to investors, which could improve tax compliance and investment sentiment.
The report emphasizes bolstering household income over mere consumption. Supporting the construction sector, a significant employer, and offering non-inflationary aid to MSMEs — contributing over 30% to GDP — can sustain economic momentum and strengthen India’s formal economy.
Despite slower revenue growth, Motilal Oswal recommends targeting a fiscal deficit of 4.5% of GDP for FY26, coupled with a 10-15% increase in capex. While FY25 spending is projected at a six-year low of 14.3% of GDP, enhancing capex growth is seen as vital to reviving economic momentum.
Highlighting a modest 8% CAGR in corporate capex from FY20 to FY24 despite tax cuts, the firm suggests focusing on creating a favorable investment environment over fiscal incentives. Government-led capex, growing at 16% CAGR, is expected to lead the charge.
Motilal Oswal underscores the need for balancing fiscal prudence with growth-focused policies. As the Budget is unveiled on February 1, the nation will eagerly await strategies to navigate economic challenges and propel sustainable growth.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.