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Informist, Monday, Feb. 3, 2025

 

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--Fin secy: Budget to help with demand-supply issues 
--CONTEXT: Fin secy speaking at FICCI's post-Budget event 
--Fin secy: Made Budget keeping FX, macroeconomic stability in mind 
--Fin secy: Made Budget keeping growth, inflation in mind 
--Fin secy: We need to do a lot more on regulatory reforms 
--Fin secy: FY26 Budget is non-inflationary
 

 

NEW DELHI – The Union Budget for 2025-26 (Apr-Mar) presented on Saturday is non-inflationary and the government believes that savings from the proposed tax cuts will come back to the economy through savings, consumption, and investment, Finance Secretary Tuhin Kanta Pandey said. "We have a non-inflationary budget," he said at a post-Budget event organised by the Federation of Indian Chambers of Commerce & Industry.

 

A key takeaway from Finance Minister Nirmala Sitharaman's eighth Budget was the hike in the tax rebate limit to INR 1.2 million, effectively meaning that individuals with income of up to INR 1.2 million per year will be entirely exempted from paying income tax. This move was aimed at increasing disposable income in the hands of taxpayers to spur demand.

 

In an interview with Informist on Sunday, Pandey had said this measure will give much-needed impetus to the economy, and will give room to the Reserve Bank of India to lower interest rates. "Reduction of rates is a very important instrument to spur demand and investment. In our assessment, this is a very good way to lift the spirits," Pandey had said on Sunday.

 

On Monday, Pandey said the Budget has given more money in the hands of taxpayers without putting strain on fiscal deficit. "We are sticking to our fiscal consolidation, we said 4.9%, (but) delivered 4.8%. That time we had said for next year 4.5% but we doing 4.4%. We said that we will give a roadmap and we have given the road map," he said.

 

The Budget has pegged fiscal deficit at 4.4% of GDP for FY26, and lowered the target for FY25 by 10 basis points to 4.8% of GDP. 

 

"So you have to balance the competing imperatives. We have to have fiscal consolidation on the one hand, because we don't want to be inflationary in our approach. If we are trying to stimulate (the economy), then we should not. It may end up being inflationary and it will reverse the very process of inflation control that we have been working at and will be counterproductive," he said.

 

Pandey said the various measures including the tweaks in direct and indirect tax will promote savings, investment, and growth. The Budget also proposed several demand side and supply side measures including for agriculture sector. "Food inflation, for example, if we are not able to really address some of those structural supply factors, it will keep hurting us year after year and it will keep our interest rates high. It doesn't help the industry, doesn't help the middle class, because people end up paying higher equated monthly instalments," he said.

 

"But then if you have inflation, then you cannot have proper growth. You have to have inflation under control. So therefore, growth and inflation mix needs to be considered together, keeping our exchange rates and macroeconomic stability in mind. So all these factors we have taken on board while trying to balance."

 

Pandey said the government has introduced a lot of reforms for sectors like insurance, export and agriculture, but there is a need to do a lot more on regulation.  End

 

Reported by Sagar Sen and Krity Ambey

Edited by Ashish Shirke

 

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