India Unveils Budget with Tax Cuts for Middle Class and Major Boosts for Farmers
New Delhi, India – In a bid to stimulate domestic demand and navigate global economic uncertainties, India unveiled its annual budget on Saturday, featuring significant tax cuts for the middle class and major investments in the agriculture sector.
Finance Minister Nirmala Sitharaman emphasized the government’s commitment to inclusive growth, stating that the budget aims to empower individuals and industries alike while maintaining fiscal discipline. The government has set a fiscal deficit target of 4.4% of GDP for the 2025-26 financial year.
Relief for the Middle Class with Tax Cuts
One of the most notable announcements was a substantial revision in personal income tax rates. The threshold for taxable income has been raised from $8,074 to $14,800, reducing the burden on salaried individuals and boosting household savings and investment.
“The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings, and investment,” Sitharaman said in her speech.
Prime Minister Narendra Modi’s government, now in its third term, has faced mounting pressure to address concerns regarding unemployment and sluggish income growth. The move is expected to alleviate some of these concerns and foster economic expansion.
Agriculture Sector Gets a Major Push
To enhance productivity in the agricultural sector, the government has announced a national program to promote high-yielding crops, with a special emphasis on pulses and cotton production. At least 17 million farmers are expected to benefit from this initiative.
Furthermore, the government has increased the ceiling for subsidized agricultural credit from $3,460 to $5,767, ensuring better financial support for farmers. This comes at a crucial time when food inflation has been a persistent issue, impacting disposable incomes and overall economic stability.
Gig Economy Workers to Receive Government Support
Recognizing the growing role of gig workers in India’s economy, the government has pledged to formally register them and provide access to welfare programs, including healthcare benefits. A national registry and identity cards will be introduced to streamline their inclusion in social security schemes.
India’s gig economy is projected to employ more than 23 million people by 2030, and this move aims to bring better job security and benefits to workers in this fast-expanding sector.
Focus on Manufacturing and Financial Sectors
To bolster the manufacturing industry and exports, the government is set to launch new initiatives. Sitharaman reiterated the administration’s long-term goal of increasing the share of manufacturing in GDP from 17% to 25%. While specific details remain undisclosed, the initiative signals a renewed push for industrial growth.
In a major reform for the financial sector, the foreign direct investment (FDI) cap on insurance has been raised from 74% to 100%. This measure is expected to deepen insurance penetration in India and attract more global investments into the sector.
Economic Outlook and Growth Projections
India, the world’s fifth-largest economy, is expected to experience its slowest growth in four years, with GDP expansion projected between 6.3% and 6.8% for the next fiscal year. Challenges such as sluggish urban demand, weak private investment, and high food inflation continue to pose concerns.
With this budget, the government aims to drive economic recovery by fostering investment, supporting key industries, and providing direct financial relief to the middle class and farmers. The success of these measures will be crucial in sustaining India’s long-term economic trajectory.
Today’s exchange rate: 1 USD = 86.5360 Indian Rupees.
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