Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025 today, marking her eighth consecutive Budget presentation. This brings her close to the record of 10 Budgets presented by former Prime Minister Morarji Desai.

The Budget comes at a crucial time, amid global economic uncertainty and India's growth rate slowing to a four-year low. Additionally, new US President Donald Trump's tariff threats against India and other nations have added to economic concerns. Ms Sitharaman will begin her Budget speech at 11 AM.

Expectations of Tax Relief and Financial Support

There is heightened anticipation regarding tax relief, particularly for the lower middle class. A day before the Budget, Prime Minister Narendra Modi expressed hope for economic upliftment, stating, "I pray to Goddess Lakshmi that the poor and middle class sections in the country are blessed by her." This has fueled speculation that the government may introduce income tax cuts and an increase in the standard deduction.

Currently, under the old tax regime, the basic exemption limit stands at ₹2.5 lakh, while under the new regime, it is ₹3 lakh. Any adjustments to these thresholds would provide relief to taxpayers.

Infrastructure Push and Financial Inclusion

With the Economic Survey emphasizing financial inclusion, the Budget may focus on expanding credit access for rural households and small businesses. Measures to support microfinance institutions, self-help groups, and other financial intermediaries could be introduced.

Infrastructure development remains a priority, with large investments needed over the next decade to meet India's growth targets. While current government spending on infrastructure stands at ₹11.11 lakh crore, it is expected to fall short by nearly 20%. Ms Sitharaman is likely to announce measures to boost investment in this sector.

Boosting Domestic Manufacturing and AI Innovation

The Budget may also include revisions to tariff structures aimed at strengthening domestic manufacturing while managing exchange rate pressures. Policies encouraging local production and reducing import dependence could be unveiled.

Additionally, advancements in artificial intelligence (AI) could receive special attention. The topic was widely discussed at the recent World Economic Forum in Davos, and China’s efficient AI model, DeepSeek, has intensified the global race for AI leadership. India may introduce new policies to accelerate AI development.

Corporate Tax and Fiscal Consolidation

Economists predict that the Budget will introduce measures to attract new manufacturing investments, including a concessionary tax rate for new factories. However, balancing lower tariffs with domestic industry protection remains a challenge.

With President Trump pushing for corporate tax cuts in the US, India may feel pressure to maintain competitive tax rates. In 2019, India reduced corporate tax rates from 30% to 22% to stimulate investment, but analysts argue that while corporate profit margins improved, the move did not significantly boost job creation or new investments.

Despite these considerations, the government is expected to stay on course with fiscal consolidation, targeting a fiscal deficit of 4.5% of GDP for FY26, compared to 4.8% for the current financial year ending March 31.

As Ms Sitharaman presents the Budget, all eyes will be on key announcements that could shape India's economic trajectory in the years ahead.