Financial Insights That Matter
(Bloomberg) — India’s finance minister gave middle class consumers 1 trillion rupees ($11.5 billion) in tax relief in her budget Saturday, seeking to shore up a slowing economy as global risks worsen.
Most Read from Bloomberg
Individuals with annual income up to 1.2 million rupees will effectively be exempt from paying income tax, Finance Minister Nirmala Sitharaman told lawmakers in New Delhi, raising the cap from 700,000 rupees. She also announced a slightly smaller budget deficit for the coming fiscal year, with a modest increase in infrastructure spending.
The tax changes will affect 10 million individuals, increasing the number of those paying zero income tax to 60 million, or about 74% of all taxpayers. The move will “substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment,” the minister said.
The budget comes against the backdrop of India’s weakest economic growth since the pandemic and rising geopolitical risks as US President Donald Trump roils global trade with threats of widespread tariffs. Investors have already wiped about $600 billion from India’s stocks in the past month.
The government estimated growth of just 6.4% in the current fiscal year — well below the 8% annual growth needed for Prime Minister Narendra Modi to meet his ambitious economic goals of making India a developed nation by 2047. The economy is expected to expand 6.3%-6.8% in the coming fiscal year.
Despite the revenue loss from tax cuts, Sitharaman still managed to target a lower budget deficit in the coming year of 4.4% of gross domestic product, slightly below the 4.5% previously estimated. An increase in transfers from the central bank and government-owned financial institutions will partly help to offset the drop in tax revenue. The deficit would be funded through slightly higher-than-expected bond sales of 14.82 trillion rupees.
On the spending side, the government underspent on its capital expenditure this year, resulting in a smaller budget deficit of 4.8% of GDP, compared with a previous estimate of 4.9%. Capital spending is projected to grow 10% to 11.2 trillion rupees in the coming fiscal year.
“Our endeavor will be to keep the fiscal deficit each year such that the central government debt remains on a declining path as a percentage of the GDP,” she said, projecting debt of 50% of GDP by March 2031.
#1a73e8;">Boost Your Financial Knowledge and Achieve Stability
Discover a growing online community dedicated to delivering financial news, tips, and strategies designed to help you manage money effectively, save smarter, and grow your investments with confidence.
#1a73e8;">Top Financial Tips for Saving and Investing
- Personal Finance Management: Master the art of budgeting, expense tracking, and building a strong financial foundation.
- Investment Opportunities: Stay updated on market trends, learn about stocks, and explore secure ways to grow your wealth.
- Expert Money-Saving Advice: Access proven techniques to reduce expenses and maximize your financial potential.