As the Union Budget 2025 approaches, hopes are high across industries for reforms and initiatives that can drive economic recovery and growth. From revitalizing consumption and accelerating capital expenditure (capex) to supporting critical sectors like insurance, healthcare, and digital infrastructure, industry leaders have outlined their expectations for the upcoming budget. Here’s a detailed look at expectations from Union Budget 2025:
A Pivotal Moment for India’s Economy
The Union Budget 2025 comes at a time when the Indian economy faces challenges such as a bearish equity market, slowing capex, and uneven sectoral growth. Global economic pressures, coupled with domestic demand concerns, have created an urgent need for a well-thought-out budget that can act as a catalyst for recovery. The budget offers a critical opportunity to reset the trajectory for sustainable development and long-term prosperity. Industry leaders are calling for bold reforms and targeted measures that can stimulate growth across sectors, build confidence among investors, and support key areas of economic activity.
Equity Market and Economic Revival
Santosh Meena, Head of Research, Swastika Investmart, highlighted the short-term bearish trend in the Indian equity market since September 2024, driven by an economic slowdown. According to him, the Union Budget presents an opportunity to reignite optimism and resume the long-term bull run. Meena emphasized the following measures:
- Boosting Domestic Consumption: Increasing disposable income through tax exemptions or job creation for the middle class is crucial. Speculation is rife that the government may raise the tax exemption limit for individual incomes up to INR 10 lakh, which could significantly enhance consumption. This could provide much-needed relief to households struggling with inflation and rising living costs.
- Accelerating Capex Spending: Government expenditure on infrastructure sectors like railways and defence could play a pivotal role in economic growth. Fresh momentum in capex spending is essential to stimulate activity. Additionally, policies to encourage public-private partnerships (PPPs) could amplify the impact of government investments.
- Sectoral Support: The healthcare, real estate, and renewable energy sectors require targeted support. Measures like higher tax exemption limits on home loan interest, GST reductions on life insurance premiums, and incentives for green energy can help bolster these industries. A comprehensive approach to promoting manufacturing, especially in the renewable energy and defence sectors, could yield long-term benefits.
- Tax Reforms for Investments: Meena has also supported the Association of Mutual Funds in India (AMFI) in calling for a reduction in Short-Term and Long-Term Capital Gains (STCG and LTCG) taxes, lowering the Securities Transaction Tax (STT), and reintroducing indexation benefits to encourage long-term investments. Simplified tax structures could make equity investments more attractive, boosting capital inflows.
Insurance Industry: Towards ‘Insurance for All’
Shilpa Arora, Co-Founder & COO, Insurance Samadhan, emphasized the need for reforms to make insurance more accessible and affordable, aligning with the IRDAI’s vision of achieving ‘Insurance for All by 2047.’ Key expectations include:
- Reduction in GST on Insurance Premiums: Lowering the current 18% GST rate would make insurance coverage more affordable and encourage the adoption of essential policies like health, life, and motor insurance. The reduction could especially benefit first-time buyers, closing the insurance gap.
- Separate Tax Provisions for Term and Whole Life Plans: Creating a separate tax benefit category under the old tax regime can incentivize individuals to secure their families with adequate coverage. This would shift the focus from investment-linked insurance products to pure protection plans.
- Higher Tax Deduction Limits for Health Insurance: Raising limits under Section 80D to INR 50,000 for individuals and INR 1,00,000 for senior citizens can encourage higher health insurance coverage. Enhanced coverage will empower people to better handle rising medical costs and inflation.
- Affordable Senior Citizen Health Insurance: Enhanced tax relief for senior citizens can ensure better financial security during medical emergencies. Policy adjustments aimed at reducing premiums for older adults could make health coverage more inclusive.
Financial Inclusion and Digital Infrastructure
Arun Poddar, Executive Director & CEO, Choice International, highlights the critical need to prioritize financial inclusion in Union Budget 2025.
“In the upcoming Union Budget 2025, there is a strong opportunity to prioritize financial inclusion, which remains a cornerstone of sustainable economic growth. Allocations toward initiatives like PM Jan Dhan Yojana can help improve access to financial services, particularly in rural and underserved regions,” said Poddar.
He further emphasized the role of digital infrastructure in bridging the financial inclusion gap, stating its immense potential to connect marginalized communities with essential financial tools. Poddar also urged the government to enhance financial literacy programs to ensure individuals not only have access to financial services but also the knowledge to use them effectively.
In addition, he pointed out the importance of targeted financial support for small businesses and startups, especially in Tier 2 to Tier 6 cities, which could drive economic self-reliance and unlock growth in regions vital to India’s small finance ecosystem. Encouraging fintech collaborations and introducing tax incentives for digital financial services were other key suggestions aimed at fostering an inclusive and resilient economy.
Digital Innovation and Reskilling
Venkatraman Narayanan, Managing Director & CFO, Happiest Minds, emphasizes the need for reforms that align with India’s aspirations for economic expansion and digital innovation.
“As we approach the Union Budget 2025, we hope for policy measures that accelerate India’s journey towards becoming a global digital innovation hub. All action taken to strengthen our domestic economy, more money into Capex, reduction of taxes on the individual taxpayer thus putting money into his hands and eventually driving consumption, simplification of tax procedures, both direct and indirect, and reduction in the compliance burden would really put us back on the path of continued growth,” said Narayanan.
He also stressed the importance of bolstering India’s digital infrastructure and introducing reskilling programs to prepare the workforce for future opportunities. According to Narayanan, these measures will ensure equitable growth and provide the foundation for India’s leadership in the digital economy.
Narayanan underlined the need for a budget that fosters mindful growth while enhancing global competitiveness, which will significantly contribute to India’s position as a prominent player in the global digital landscape.
Sectoral Highlights
- Healthcare: Increased allocation to the healthcare sector is expected to address concerns over the resurgence of viral infections. Higher tax deductions for medical expenses can provide relief to individuals. Initiatives to enhance public health infrastructure and expand telemedicine services can improve healthcare access.
- Real Estate: Reforms such as higher tax exemption limits on home loan interest can enhance affordability and spur demand in the housing market. Policies to encourage affordable housing projects can stimulate both urban and rural real estate development.
- Renewable Energy: Continued focus on green energy with enhanced incentives can accelerate India’s transition to a sustainable future. Support for electric vehicles (EVs) and solar energy adoption through subsidies could solidify India’s leadership in renewable energy.
- Mutual Funds and Equity Investments: Lowering capital gains taxes and reintroducing indexation benefits can attract long-term investors and revitalize the equity markets. Simplified compliance for mutual fund investments could further increase participation.
Conclusion
The Union Budget 2025 is poised to play a pivotal role in setting the tone for India’s economic recovery and growth trajectory. By addressing consumption, accelerating capex, and providing targeted support to key sectors, the government has the opportunity to create a strong foundation for sustainable growth.
Industry leaders are optimistic that bold and forward-looking measures will reignite confidence and optimism, propelling India toward a brighter economic future. With strategic investments in infrastructure, digital innovation, and social welfare, Union Budget 2025 could mark the beginning of a transformative journey for India’s economy.
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