– By Moin Ladha and Priyal Sanghvi
As the Union Budget 2025 approaches, the anticipation is palpable across industries. Each year, the Budget is more than a fiscal roadmap; it is a policy statement that reflects the Government’s goals and priorities for the nation’s economic trajectory. The aspirational vision for a ‘Viksit Bharat’ (literally meaning an ‘Advanced India’) by 2047, is expected to unveil key reforms that align with this long-term goal. The potential transformative regulatory measures span foreign investments, sector-specific reforms, and initiatives aimed at enhancing ease of doing business that will foster sustainable growth, enhance competitiveness, and position India as a global economic leader.
Among the most anticipated announcements is the potential liberalisation of Foreign Direct Investment (FDI) norms in the insurance sector. Raising the current FDI cap from 74% to 100% through proposed amendments to the Insurance Act could attract foreign participation, drive competition, and enhance efficiency in this critical sector. The Insurance (Amendment) Bill, which may enable agents to sell products from multiple insurers, is another reform expected to democratise the market and expand the scope of choices available to consumers. Such steps, aligned with recommendations from the 2024 Economic Survey, could signal the Government’s commitment to positioning India as a preferred investment destination. Additionally, potential relaxations under Press Note 3 could further open avenues for foreign investment in India.
The International Financial Services Centre (IFSC) in GIFT City, the cornerstone of India’s ambition to become a global financial hub, is expected to receive regulatory and fiscal support in this Budget. Simplified taxation, procedural roadblock clearance and reduction in compliance burdens are expected to make IFSC a more attractive proposition for global players. Further, targeted incentives could accelerate its growth and bolster India’s presence on the global financial services map.
For the Non-Banking Financial Companies (NBFC) sector, key reforms are anticipated to strengthen its role in driving economic growth. The introduction of a dedicated refinance facility aimed at supporting priority sectors such as agriculture and small enterprises could address critical funding gaps. Additionally, increasing borrowing caps under priority sector lending and revising Tax Deducted at Source (TDS) provisions would ease financial constraints. A significant development could be the introduction of a separate, liberalised regulatory regime for NBFCs that do not have an interface with public funds and engage solely in proprietary investments for their promoter shareholders. Such measures would align with international practices and reduce compliance requirements for these entities, thereby fostering innovation and growth within the sector.
India’s efforts to improve its Ease of Doing Business ranking have been commendable, but the journey is far from complete. The Budget presents an opportunity to further integrate compliance mechanisms and simplify approval processes through the National Single Window System. Strengthening judicial enforcement, encouraging alternative dispute resolution methods, and leveraging digital platforms to streamline compliance are essential steps. These reforms would reduce operational burdens and enhance the overall business environment, creating a fertile ground for investment and entrepreneurship.
The real estate sector, a significant contributor to India’s GDP, is keenly watching for regulatory adjustments. Streamlining the Real Estate Investment Trusts (REIT) framework and incentivising infrastructure investments could unlock new opportunities for growth while bolstering investor confidence. Urban development, a key pillar of economic progress, stands to gain from such forward-looking measures.
The Union Budget 2025 is expected to usher in a new era of regulatory reforms that could redefine India’s economic landscape. The Government has the potential to build a robust and resilient economy that not only fosters growth but also inspires global confidence. The Budget’s outcomes will undoubtedly shape India’s path toward its long-term vision of becoming a developed nation by 2047.
(Moin Ladha, Partner; and Priyal Sanghvi, Associate, Khaitan & Co.)
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