India will focus on enhancing the spending power of its middle class, promoting inclusive development, and boosting private investment to stimulate economic growth, Finance Minister Nirmala Sitharaman said on Saturday while unveiling the annual budget for 2025-26. The budget will include measures aimed at supporting the poor, youth, farmers, and women, along with plans for transformative reforms in taxation.
Despite being the world’s fifth-largest economy, India is expected to experience its slowest growth in four years, primarily due to weak urban demand and sluggish private investment. The Chief Economic Adviser’s report, released on Friday, indicated that India’s economy is projected to remain subdued in the fiscal year starting April 1. It also emphasised the need for long-delayed reforms in land and labour sectors to enhance medium-term growth prospects.
Although growth for the near term is aligned with the 10-year average, economists suggest India requires an 8% growth rate to achieve its long-term economic objectives and create sufficient jobs for its young population. Experts have proposed tax cuts on income and energy products to ease the burden on individuals, alongside building on the $24 billion job creation schemes introduced in the first post-election budget in July.
The budget will also introduce measures in sectors such as urban development, power, and mining. However, equity markets remained flat as traders awaited more details on the announcements. As of 11:17 a.m. IST, both the Nifty 50 and BSE Sensex were up by approximately 0.3%.
India has faced high food inflation over the past year, with retail inflation easing to a four-month low of 5.2% in December. However, food inflation, which accounts for nearly half of the consumption basket, remained elevated at 8.39%.
To boost productivity in the agricultural sector, the government will launch a national mission aimed at increasing the production of high-yielding crops, particularly pulses and cotton. Additionally, the limit for subsidised credit to farmers has been increased to Rs 500,000 ($5,778), up from the previous Rs 300,000.