The Indian budget for 2025-2026 of the Modi government is likely to provide a boost to domestic consumption, with the finance minister announcing that no tax will be payable on income up to Rs 1.2 million. Expectations are that this could provide a considerable consumption boost of Rs 700 billion, and it can be rightfully termed middle-class-friendly. The budget is also reform-centric, with the government planning to reduce the fiscal deficit to 4.4%, which is 0.4% lower than last year. This sets the stage for potentially reducing the deficit even further to 3% by FY29. The fiscal deficit of India, which had grown to astronomical levels during Covid, has been brought down gradually with minimal disruption, and the long-term roadmap seems achievable which is commendable. This is a big positive from a macroeconomic perspective since it shows that the government is fiscally disciplined and ensures that the economy’s private sector and households are not liquidity-constrained. Another big positive is the huge capex of Rs11.2 trillion, larger than the previous year, focusing on roads and railways, which will act as a growth multiplier. Indian stocks focussed on the domestic consumption theme and infrastructure will benefit from the budget proposals. For NRIs, the budget also aims to simplify investment facilitation, rationalise tax filing, and enhance digital services.
Indian Budget 2025-26: NRI Reforms to Simplify Investment and Tax Filing
