India's government, led by Prime Minister Narendra Modi, has committed to fiscal prudence in the latest budget announcement. The budget, the first since the national elections in June that resulted in a new coalition government, sets the stage for significant financial reforms and targeted spending.
Revised Fiscal Deficit Target
In a move to tighten the fiscal discipline, India's finance ministry on Tuesday lowered the fiscal deficit target to 4.9% for the financial year ending March 2025. This is a revision from the 5.1% target set in the pre-election interim budget published in February. Finance Minister Nirmala Sitharaman announced that the fiscal deficit target will further decrease to 4.5% or lower by March 2026.
Steady Capital Expenditure
Despite the revisions in the fiscal deficit target, the government will maintain its capital expenditure at the previously set figure of 11.11 trillion Indian rupees ($133.9 billion). This expenditure, which constitutes 3.4% of the GDP for the fiscal year 2025, underscores the government's commitment to infrastructure and development projects.
Corporate Tax Reforms
The budget outlines a reduction in the corporate tax rate on foreign companies from 40% to 35%. This reduction aims to attract more foreign investment and stimulate economic growth. Additionally, the government plans to abolish the angel tax for startups, a move expected to boost the startup ecosystem in India by easing the financial burden on new businesses.
Focus on Job Creation and Fiscal Prudence
While pledging fiscal prudence, the government has also promised to prioritize spending on job creation. This balanced approach aims to stimulate economic growth while ensuring financial stability.
India's new budget marks a significant step towards fiscal responsibility and economic reform. The government's commitment to reducing the fiscal deficit, maintaining capital expenditure, and implementing tax reforms sets a promising tone for India's economic future.