Finance Minister Nirmala Sitharaman speaks in the Lok Sabha on February 11, 2025. Photo: Sansad TV via PTI

India’s economy is in the midst of “a speedy rebound” after a brief moderation in the second quarter of this year, Finance Minister Nirmala Sitharaman said on Tuesday, asserting that the Union Budget 2025-26 has sought to address the immediate challenges facing the national economy amid “immense” global uncertainties.

Responding to the discussion on the Budget in the Lok Sabha, Ms. Sitharaman said the Budget very clearly spoke of the various means through which the Centre wants to increase the liquidity available to the people, and aims to uplift households’ sentiments, spur private sector investments, and accelerate growth.

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‘Strong economic foundations’

Stressing that India’s economy grew by an average of about 8% in the three years prior to 2024-25, Ms. Sitharaman said: “Only in two of the last 12 quarters has the growth rate touched 5.4% or remained below it. I want to inform the members that on account of strong economic foundations, a speedy rebound is happening and we shall take measures which will, going forward, help keep our economy as the fastest growing economy as it has in the last few years.”

Private Final Consumption Expenditure (PFCE), the Minister pointed out, is expected to grow 7.3% in 2024-25, driven by rural demand. Overall, PFCE is estimated to be at 61.8% of nominal GDP, the highest level since 2002-03.

Global uncertainties

The Budget has come at a time of immense uncertainties and changes in the global macro-economic environment, when issues of global concern like persistent conflicts, stagnation in global GDP, and sticky inflation in the emerging markets also have an impact on India’s budget, she said. These are “vitiating the atmosphere” for all developing economies, she noted.

While these uncertainties have weighed on the Budget-making process, the government has sought to balance national developmental priorities with fiscal imperatives, Ms. Sitharaman underlined. She also addressed some members’ concerns about money being denied for capital expenditure projects.

‘Capex outlays up’

“I heard occasionally this argument being put forward, saying, has the paradigm shifted from capital expending because that gives a greater multiplier effect to giving people, the taxpayers, some money in their hands… No, capital expenditure outlays have not come down at all. On the contrary, they have gone up,” she said.

The effective capital expenditure for 2025-26 is pegged at 4.3% of GDP, which is 0.1% lower than the fiscal deficit of 4.4% of GDP, the Minister said. “What does it indicate? The government is using almost the entire borrowed resources for financing effective capital expenditure. The borrowings are not going for revenue or other committed expenditure… It’s going only for creating capital assets,” she emphasised.

Prime Minister Narendra Modi addressed the media at Parliament House on the first day of the Union Budget session of Parliament
| Photo Credit: Shiv Kumar Pushpakar

Prime Minister Narendra Modi on February 1 termed the Union Budget as the “first budget of Amrit Kaal” (the 25-year period between the 75th year of independence and its centenary) and said that it would lay a strong foundation for building a developed India.

“The first budget of Amrit Kaal will build a strong foundation for building a developed India. It gives priority to the deprived. This Budget will fulfil the dreams of an aspirational society including poor people, middle-class people, and farmers. I congratulate Nirmala Sitharaman and her team for this historic budget,” Prime Minister Modi said in a televised address after the presentation of the Union budget.

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The Prime Minister called the middle class a big force to fulfil dreams of prosperous, developed India and said his government has taken many decisions to empower them. The Budget for this year rejigs tax slabs and exempts those with an income of ₹7 lakh per annum (up from ₹5 lakh per annum in the past) from paying personal income tax and also brings down the effective rate of tax for the higher tax brackets as well.

He hailed the unprecedented investment of ₹10 lakh crore in infrastructure and said it will give speed and new energy to development. Noting that PM Vishvakarma Kaushal Samman will bring a huge change in the lives of “Vishvakarmas,” the Prime Minister said that for the first time schemes relating to their support has been incorporated into the budget.

“Those toiling traditionally through their hands for the country, ‘Vishvakarmas’ are the creators of this country. For the first time scheme related to training and support for ‘Vishvakarma’ has been brought into the budget. Preparations have been made for their training, technology, credit and market support. PM Vishvakarma Kaushal Samman means PM Vikas will bring about a huge change in the lives of crores of Vishwakarma,” the Prime Minister said.

Prime Minister Modi underlined the government’s efforts to enhance the lives of women. “The government has taken several steps to make the lives of women, in rural and urban areas, easy. Women’s self-help groups will further enhance them. Special savings scheme will be started empowering women in households,” the Prime Minister said.