The Budget 2025 is an important opportunity for Finance Minister Nirmala Sitharaman to address the immediate problems of the common man. With inflation, negative real wages and job market decline, households across the country need help. The cost of living has risen while job opportunities are limited, and this has affected household income, which in turn has affected consumption and hence market and corporate earnings.
This is because inflation is still a big issue as people struggle with the high prices of vegetables, cooking oil and milk. Most food price increases are attributed to factors such as extreme weather, increased import taxes and increased costs of input factors in production. Although we have recently seen a decrease in milk prices, more drastic measures like cutting import taxes on edible oils are needed to reduce the costs for consumers and FMCG companies.
This wage growth has also been very low for non-salaried workers, which has only added to the purchasing power dilemma. Over the past few years, income growth has been weaker than price increases, and as a result, consumers have cut spending. Nonetheless, corporations in India have reported strong profits during the post-COVID recovery, but these profits have not been felt by the workforce, resulting in significant income gaps.
Hence, the rate of economic growth of 6.4 percent in the year 2024-25 shows that government spending on infrastructure has to be increased. Investments in capital intensive projects which boost demand for industries like steel and cement and also create employment opportunities in manufacturing and construction is very important in turning around the trend. It is therefore important that there is a clear commitment to increase public expenditure to support market recovery.
This is because, job creation is still a problem, while millions of people who left for the rural areas during the pandemic have not yet all come back to the urban workforce. The government has to encourage MSMEs through incentives and the private sector has to invest in labour-intensive industries to solve the problem of employment. Furthermore, the targeted support for agriculture may also help to alleviate rural poverty.
This puts a lot of weight on the low and middle income earners, and this has not been addressed. Indirect taxes such as GST are not within the government’s control to set, but importing taxes and petroleum taxes can be reduced. Another long standing proposal is to cut income tax for individuals in the lower brackets, this is still unmet, and this could mean that more people have disposable income to spend in the market.
The government should be able to address these issues in the Budget 2025 to restore the confidence of the public and sustainable economic development. For the average person, the measures proposed in these areas are not only nice but necessary.
