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Informist, Monday, Feb. 3, 2025

--CEA: Geopolitical uncertainties guiding tools for several budget proposals 
--CONTEXT: CEA Nageswaran speaking at CII's post-Budget event 
--CEA: Pvt sector has been investing, albeit with lower pace 
--CEA: FY26 income tax cut to nudge private sector to invest

NEW DELHI – Proposals in the Union Budget for 2025-26 (Apr-Mar) aim to support economic growth by encouraging domestic manufacturing and demand, as the geopolitical and geo-economic climate cannot be relied on for GDP expansion, Chief Economic Adviser V. Anantha Nageswaran said. 

"It is quite clear that the current state of the world, in terms of geopolitical and geo-economic uncertainties, is very much the guiding tool behind many of the proposals you see in the Budget, including the widely discussed tax cut," Nageswaran said at the Confederation of Indian Industry's interactive session on the FY26 Budget on Monday. The widely discussed tax cut that the economist was referring to was the tax exemption announced in the Budget on income up to INR 1.2 million.

The income tax cut, which is likely to boost consumer demand in the economy, could nudge the private sector to expand capacity, Nageswaran said. Thus, private capital expenditure, which has been happening at a slower than expected pace so far, will pick up going ahead, he added. 

While the government has been trying to induce a multiplier effect on private investment through high public capital expenditure since FY20, it has also deployed the consumer boost strategy for next year to spur private investment. Besides, there have also been concerns over India's consumer demand after the private final consumption fell to a three-year low of 4% in FY24.

The government has nearly tripled its own capital expenditure in the last five years. The government's capital spending in FY26 is set to rise to INR 11.21 trillion from INR 10.18 trillion in the revised estimate for FY25.  End

Reported by Krity Ambey, Priyasmita Dutta, and Sagar Sen

Edited by Tanima Banerjee

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