Budget and Economic Challenges

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The Budget 2025-26 faces challenges in reviving domestic demand and addressing income disparity while balancing fiscal prudence.

The Indian economy is experiencing slowing growth due to weak consumption and reduced public capital expenditure. Private investment remains sluggish, and external trade prospects are uncertain. The government aims to revive domestic demand to achieve its Viksit Bharat 2047 vision.

Income disparity is a major concern, with corporate profitability rising while wage and employment growth remain moderate. The Economic Survey highlights a trend of income concentration, leading to weakened domestic demand. The government has not fully offset this with increased capital expenditure.

The Budget attempts to mobilize resources by taxing large corporations while providing concessions to middle-class taxpayers. The tax-free income level is raised, and tax benefits are expanded. However, tax concessions for corporations and businesses limit overall government spending capacity, impacting public investments.

The government's strategy includes regulatory reforms to attract private investment, but the Economic Survey warns that supply-side incentives alone may not drive demand. Without stronger demand, corporate investment may not materialize as expected.

Foreign investment policies are also being liberalized. The cap on foreign ownership in insurance is removed, and investment treaties are being adjusted to attract investors. The government balances these changes with fiscal discipline by reducing the deficit from 4.8% to 4.4% of GDP.

Despite ambitious plans, concerns remain about demand revival, public expenditure, and sustainable economic growth.