Budget Politics 2025: Middle Class, ₹12 Lakh, Market Unmoved

Budget Politics 2025: Middle Class, ₹12 Lakh, Market Unmoved:

Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has triggered a lot of debate in all sections of Indian society. As India is the largest democracy in the world, politics is a part of almost every action and reaction, and sphere of life, so the budget cannot be isolated from political considerations. The initial thrust will be on the middle class, farmers, and upcoming elections in Bihar. But the stock market stayed mostly flat despite significant tax relief measures. What you will learn: What is Union Budget, History behind Union Budget, Highlights of the 2025 budget, and Implications of proposals all are explained in this article.

What is a Budget?

So just in case you are wondering what a budget actually means, here is a simple explanation: It is a financial plan that describes predicted revenues and expenses during a certain timespan, usually a fiscal year. "The Union Budget is a comprehensive document that contains details of the government's policies on taxation, government spending, and other financial statements in India, and it is presented every year by the Finance Minister." This is an image of the government's interest for economic growth and the solutions to the socio-economic issues faced by the citizens.

Overview of Union Budget 2025:

On February 1, 2025, Finance Minister Nirmala Sitharaman presented the Union Budget for 2025-26, marking her eighth consecutive budget announcement. The budget emphasizes significant allocations across key sectors, including agriculture, health, and education, with a total capital expenditure set at ₹10.18 lakh crore. A notable highlight is the introduction of a new income tax regime that exempts individuals earning up to ₹12 lakh from paying income tax, aimed at providing substantial relief to taxpayers. Additionally, the budget proposes a ₹10,000 crore fund for startups and the establishment of 50,000 Atal Tinkering Labs in government schools over five years to foster innovation among students. However, despite these initiatives, the stock market reacted tepidly, reflecting concerns over fiscal deficit targets projected at 4.8% of GDP and the overall economic growth forecast of 6.3-6.8% for FY26. 

The budget also includes exemptions from customs duties on essential minerals and items related to electric vehicle battery manufacturing, signaling a push towards sustainability and self-reliance in critical sectors. According to reports from The Indian Express, as we kick off 2025, this much-anticipated Union Budget has been unveiled to offer a roadmap for India’s growth and fiscal stability. The government has outlined several strategic initiatives aimed at bolstering economic recovery post-pandemic while promoting inclusive growth and enhancing India's competitive edge on the global stage.

History of Union Budgets:

The Union Budget has been presented in India since 1860 during the British period. A lot has changed since then. James Wilson, who made the first budget as Finance Member of the Viceroy's Executive Council. From year to year, budgets have captured changing economic circumstances and policy priorities. In independent India, the budgets have often served as instruments for economic reform. The 1991 budget was a landmark page towards liberalization and globalization under then-Finance Minister Manmohan Singh. Later budgets had to respond to challenges that emanated from globalization and technological advancement.

Components of Union Budget 2025:

The Union Budget consists of several key components:

Revenue Receipts = Tax Revenue (Direct and Indirect Taxes) + Non-Tax Revenue (Dividends from public sector undertakings)

• Expenditure: The budget provides us with projected expenditures in different sectors like defense, education, health care, infrastructure development, and social welfare programs.
• Fiscal Deficit: The fiscal deficit represents the distance between total revenue and total expenditure. It is a key measure of a government’s fiscal condition.
• Expenditure: The budget provides us with projected expenditures in different sectors like defense, education, health care, infrastructure development, and social welfare programs.
• Fiscal Deficit: The fiscal deficit represents the distance between total revenue and total expenditure. It is a key measure of a government’s fiscal condition.
• Revenue Sensitivity: The budget also outlines proposed changes to tax rates and tax exemptions intended to stimulate economic activity.
• Tax Proposal: Specific allocations made for Gov schemes in Agriculture, Rural development, Education, Health care, Infrastructure.: The budget also outlines proposed changes to tax rates and tax exemptions intended to stimulate economic activity.

Political Reactions:

The Congress party highlighted the absence of Andhra Pradesh in this year's budget discussions, particularly given that the ruling Telugu Desam Party (TDP) in the state is a key ally of the BJP. Congress leader Jairam Ramesh remarked on this oversight by questioning why "Bihar appears to have got a bonanza of announcements" while "the other pillar of the NDA," namely Andhra Pradesh, has been "so cruelly ignored." Similarly, Congress leader Manish Tewari criticized the focus on Bihar by asking rhetorically whether it was "a budget of the Government of Bihar or a budget of the Government of India," noting that there was little mention of any other states during the Finance Minister’s speech.

Why Did the Stock Market Not Cheer?

The Union Budget 2025 saw the stock market give a thumbs-down despite big announcements like the increase in the income tax exemption limit to ₹12 lakh. There were a few reasons for this muted response:

• Market Expectations: Investors were hoping for more sweeping reforms that would provide a direct boost to growth. The budget did not specify where cuts will come from nor did it note tax incentives for companies, something many investors would have assumed as the post-crisis recovery process continued with demand stimulus.
• Global Economic Factors: Persistent global economic uncertainties fell on inflationary pressures and could have clouded domestic policy announcements.
• Implementation Doubts: There may be doubts about how the proposed measures will be implemented, and whether they will make a real difference in improving economic conditions.
• Sector-specific Effects On One Hand, Some Sectors ( For e.g. agriculture) Are Likely To Gain From Higher Spending, While Others Are Likely To Struggle To Capitalize On Budget Proposals.

New Regime vs. Old Regime of Income Tax Returns:

The Union Budget 2025 introduced significant changes to income tax regulations by distinguishing between two regimes:

• New Tax Regime: Under this regime, individuals with an annual income up to ₹12 lakh will pay no income tax due to increased exemptions and rebates. The new regime simplifies tax slabs but removes many deductions available in the old regime.

• Old Tax Regime: This regime allows taxpayers to claim various deductions (like those under Section 80C) but has higher tax rates compared to the new regime. 

Taxpayers can choose between these two regimes based on their financial situations and preferences for deductions versus lower tax rates.

Unique Aspects of Budget 2025:

The Union Budget 2025 stands out for several reasons:

• Focus on Middle Class: For the first time in recent years, there is a clear emphasis on addressing middle-class concerns with substantial tax relief measures.
• Outreach to Farmers: The budget includes targeted initiatives aimed at improving agricultural productivity in low-yield districts across India.
• Bihar's Special Attention: With upcoming elections in Bihar, specific allocations were made to enhance infrastructure and support farmers in this crucial state.
• Political Strategy: The budget reflects a strategic political approach ahead of elections by appealing to key voter demographics such as middle-class families and farmers.

Negative Aspects of Budget 2025:

While there are several positive elements in the Union Budget 2025, some negative aspects warrant attention:

• Limited Corporate Tax Cuts: Many analysts expected more aggressive corporate tax reductions to stimulate investment; however, these expectations were not met.
• Fiscal Deficit Concerns: With increased spending commitments without corresponding revenue generation strategies, concerns about rising fiscal deficits may affect long-term economic stability.
• Implementation Challenges: Questions remain about whether proposed initiatives will be effectively implemented and whether they will deliver meaningful benefits to targeted populations.

New Income Tax Slabs: 

Union finance minister Nirmala Sitharaman on Saturday presented the Union Budget 2025-2026 in the Parliament and introduced a massive relief for income tax payers.

In a historic announcement, the finance minister announced that there will be no income tax payable for those with an income up to ₹12 lakh. Here is her speech in parliament relating to 12 Lakh- 

 “I propose to revise tax rate structures as follows: 0 to ₹4 Lakhs - nil, ₹4 Lakhs to ₹8 Lakhs - 5%, ₹8 Lakhs to ₹12 Lakhs - 10%, ₹12 Lakhs to ₹16 Lakhs - 15%, ₹16 Lakhs to ₹20 Lakhs - 20%, ₹20 Lakhs to ₹24 Lakhs - 25% and above ₹24 Lakhs - 30%. To taxpayers up to ₹12 Lakhs of normal income other than special rate income such as capital gains, a tax rebate is being provided in addition to the benefit due to slab rate reduction in such a manner that there is no tax payable by them,” Nirmala Sitharaman said.

Conclusion:

The Union Budget 2025 represents a significant moment in India's fiscal policy landscape with its focus on middle-class relief and agricultural support amid political considerations ahead of upcoming elections. While it offers substantial benefits such as higher income tax exemptions for individuals earning up to ₹12 lakh annually, skepticism remains regarding its impact on market sentiment and overall economic growth.

As stakeholders analyze its implications over time, it will be crucial for both government officials and citizens alike to engage in ongoing discussions about how best to implement these policies effectively while addressing potential shortcomings highlighted by critics. For further information regarding specific allocations or data points mentioned in this article, readers can refer to resources such as The Indian Express or government publications related to the Union Budget 2025.