Union Budget 2025 Expectations: Capital goods sector eyes govt spending

For the upcoming Union Budget, the focus should be on simplifying taxation structures and strengthening MSME growth to fuel economic expansion. Providing exemptions from capital gains tax on intra-group indirect transfers can streamline corporate restructuring and optimize resource allocation. Moreover, extending reduced corporate tax rates for new manufacturers and Global Capability Centers (GCCs) will attract investments and encourage industrial growth. Additionally, continuing the exemption of IGST and Compensation Cess under the MOOWR scheme is crucial to lowering operational costs and enhancing the competitiveness of domestic manufacturers.

Equally important is addressing the financing challenges faced by MSMEs. Enhancing the PMMY to bridge credit gaps and improving access to affordable credit can empower MSMEs to scale operations and innovate. It is crucial to continue strengthening digital infrastructure to streamline credit delivery and integrate MSMEs into the formal economy. Together, these measures can create a more resilient industrial ecosystem and drive sustainable economic progress of the country.- Gaurav Singhania, Chief Financial Officer, Bizongo

As the Union Budget is on its way, the hospitality industry is looking for an effort to support recovery and growth. One of the industry's primary expectations is comprehensive tax coverage. A 100% tax coverage across different segments could alleviate financial pressures. It can also ensure that important things like food services, accommodation, and travel are adequately supported. Adjusting the taxation rates can make tourism more attractive and will encourage both domestic and international visitors. India's robust $24 billion hospitality sector, fueled by increasing disposable income and the government's commitment to tourism infrastructure development, is poised for significant growth. The country’s success in hosting global events like the G20 and the ICC Cricket World Cup has attracted global brands and investors so far, positioning India as a key destination for hospitality development. Hospitality players are ready to open a record number of properties across the country, with emerging destinations like Ayodhya and Lakshadweep set to become popular hotspots this year. Therefore, the hospitality industry also seeks investments in tourism infrastructure and sustainability initiatives, which would not only create new employment opportunities but also increase productivity. The hospitality industry wants to be rescued from high operating costs and provided with an encouraging environment for any business venture, like holiday homes and villas. There is a good future in building well-educated and skilled manpower for the industry through education and training systems in hospitality services. The hospitality community now needs clear policy and fiscal measures that will help it get ready for the new year. Therefore, we expect a balanced budget that is going to promote real estate investment and employment generation in the hospitality sector. This will set us up for a resilient and thriving industry.- Ritwik Khare, Founder and CEO, ELIVAAS

Aligned with India’s ambitious vision of becoming a $7 trillion economy by 2030, Budget 2025 must prioritise rapid infrastructure development to enable the logistics and transportation sector to realise its full potential as a catalyst for economic progress and sustainable growth.

We hope Budget 2025 will reflect the government’s commitment to continuity in reforms, stable decision-making, and progressive policies. Such measures can unlock industry potential by promoting breakthrough technological innovations, empowering start-ups to adapt to an evolving landscape, and bolstering the sector's competitiveness and resilience.

The industry anticipates bold initiatives aimed at improving last-mile connectivity and transformative reforms to strengthen the logistics and transportation ecosystem. A key expectation is the incentivisation of EV charging infrastructure, which is critical to driving sustainability through greater adoption of electric vehicles in logistics operations.

Furthermore, the budget presents an opportunity to enhance the ease of doing business through initiatives like ‘Jan Vishwas Bill 2.0’ and accelerating digitalisation efforts to optimise regulatory processes. Increasing the collateral-free Mudra loan limit and establishing dedicated e-commerce export hubs would also be significant in fostering the growth of MSMEs, a crucial driver of India’s economy.

By placing a stronger emphasis on digital transformation, Budget 2025 could significantly improve the efficiency and agility of the logistics sector. This would align the industry with global standards while creating a competitive and future-ready ecosystem that underscores the government’s commitment to a seamless and resilient business environment.-Ketan Kulkarni - managing director - Gati Express and Supply Chain Ltd

The capital goods sector, which faced challenges in 2024 due to election-related delays and a slower-than-expected pace of order inflows, is hoping for a revival on the back of expected government spending and policy continuity, according to experts. Read more

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As we approach the Union Budget, the retail sector is poised for transformative policies that could provide much-needed momentum. Key stakeholders are optimistic about potential reductions in interest rates, which would facilitate easier access to financing, thereby bolstering the retail business landscape. Within this sector, the food & beverage (F&B) retail segment is particularly hopeful for recognition as an essential service, seeking targeted subsidies and benefits for utilities and land costs.

Moreover, a budget that offers tax relief to citizens could significantly boost disposable income, thereby enhancing their purchasing power. This, in turn, would likely drive consumer spending across various retail categories.

The retail industry also requires substantial support to navigate the ongoing premiumization trend, which is shaping consumer preferences towards higher-quality products. A robust financial framework in the upcoming budget could empower retailers to innovate, expand, and meet the evolving demands of a dynamic market.- Shekhar Swarup, joint managing director, Globus Spirits Limited

As we approach the Union Budget, it is imperative for the government to prioritize policies that accelerate the adoption of clean technologies and renewable energy. The cleantech sector is keenly observing the potential support for industries committed to sustainability. Initiatives like the PM-KUSUM Scheme and the National Solar Mission have laid the foundation, but additional incentives such as tax benefits, grants, and subsidies will encourage more organizations to transition toward green solutions. Promoting self-reliance under Atmanirbhar Bharat while reducing dependency on external resources will further strengthen India's economic resilience. A focused approach in this direction will not only drive environmental health but also establish India as a leader in sustainability and innovation.- Kushagra Srivastava, founder, Chakr Innovation

The Union Budget 2025-26 is expected to hike the gross budgetary support (GBS) to the Ministry of Road Transport and Highways (MoRTH) by 5-6 percent to around Rs 2.85 lakh crore to Rs 2.9 lakh crore, multiple officials aware of the ongoing discussions told Moneycontrol. Read more

In addition, in order to underline the importance of having adequate life insurance coverage in place, the government should consider carving out a separate deduction for term insurance premium. “Key interventions such as increasing tax deduction limits under Section 80C for life insurance premiums or introducing a separate limit exclusively for term insurance and pension policies, can significantly boost life insurance penetration.

Additionally, implementing mandatory basic term life insurance coverage for formal employment, akin to the Employees’ Provident Fund (EPF), will ensure financial security for dependents in case of untimely demise,” says Sandip Goenka, CEO, ACKO Life Insurance.

More here.

Indian pharmaceutical and hospital majors are pinning their hopes on Finance Minister Nirmala Sitharaman to deliver a booster dose for the sector with higher healthcare spending in the upcoming Union Budget.

The sector is also eyeing tax breaks on research and development, as many firms shift focus to complex drugs.

More here.

The Union Budget 2025 is likely to feature a significant increase in spending on rural welfare schemes, a Goldman Sachs report said.

The report states that the major concerns for the Modi government revolve around what to prioritize for spending and the speed of fiscal consolidation. "We believe that elevated public debt-to-GDP is likely to keep the fiscal consolidation path on track, and we expect the government to target a fiscal deficit of 4.4% to 4.6% of GDP in FY26 (down from 4.9% of GDP in FY25)," Goldman Sachs said in the report.

More here.

“As we approach the Union Budget 2025-26, I am optimistic that the government will continue its focus on boosting infrastructure development, maintaining fiscal prudence, and laying emphasis on women, youth, farmers, and the underprivileged through skilling, welfare measures and financial assistance.

The important area that needs to be addressed now, amongst others, is the continued lower than expected growth in private consumption. Private consumption drives private investment and therefore I am hopeful that the GoI will take steps that boost consumption through a slew of measures that could include reviewing of personal income tax slabs and reassessment of the interest rates to provide EMI relief to the large masses whose purchases of assets such as homes and consumer durables are through loans."

The sugar industry seeks an extension of the production-linked incentive (PLI) scheme to encourage value-added products such as ethanol and biofuels, says Mukesh Kumar, Executive Director, Vishwaraj Sugar Industries.

With the government’s thrust on renewable energy, sugar mills could play a pivotal role in reducing the country’s reliance on fossil fuels. Policy incentives that promote ethanol blending and the establishment of ethanol production capacity are essential for aligning the sector with the government’s vision for energy security. Additionally, there is a strong demand for incentives on raw material procurement, particularly for the sugarcane farmers who have been grappling with delayed payments and unstable cane pricing.

A more robust financial framework to support mills in clearing farmer dues and enhancing cane quality would help stabilize the sector and ensure smoother operations.

The Global Trade Research Initiative (GTRI) proposed six reforms for Budget 2025-26 to boost India’s trade and manufacturing.

The proposals include reducing the average import tariffs to around 10 percent to increase domestic production and avoid international scrutiny.

Details here.

With the Union Budget 2025 getting closer, startups operating in the country’s education technology (edtech) sector are looking forward to fiscal policies that would shape the future of digital education in India. From reduced tax rates, to initiatives promoting upskilling and development of digital infrastructure - industry stakeholders are expecting the Centre to introduce policies designed to foster growth in recovering the sector.

More here.

While rural consumption has been on a road to recovery in the past year, the agriculture sector is hoping that the upcoming Budget of 2025 will announce measures that will further bolster rural infrastructure and improve farmer income.

The government in the forthcoming budget for 2025-26 needs to reduce tax and compliance burden on the salaried class as well as MSMEs to boost consumption and investment, Nangia & Co LLP Founder and Managing Partner Rakesh Nangia said on Monday.

Also, the Budget should focus on simplification of Income Tax Return (ITR) forms, and further rationalising capital gains tax and Tax Deduction at Source (TDS) threshold and tax rates.

Further, Nangia said to spur private sector investment a key ask of the small and medium enterprises is that the tax rate should be reduced and concessional tax rate for the manufacturing sector.

• Congress MP Gaurav Gogoi on Thursday called for a revamp of the Goods and Services Tax (GST) rates to provide relief to the "hardworking citizens" of the country.
• Speaking at a press conference, the Deputy Leader of Congress in the Lok Sabha accused the ruling BJP government of focusing primarily on the welfare of affluent people.
• "The Congress demands a restructured GST in the upcoming budget. The current GST framework is placing an unfair burden on India's middle and lower-middle classes, causing significant inconvenience to hardworking citizens," he stated.

Top officials from leading insurance companies are urging Finance Minister Nirmala Sitharaman to prioritize the life and health insurance sectors in the upcoming Budget for NDA 2.0, set to be presented on February 1. At the top of the insurance industry's wish list are proposals to increase the Section 80D deduction limit for health insurance premiums and to introduce a separate tax benefit for term insurance premiums. (Read More)

• Ahead of the upcoming Budget, the Confederation of Indian Industry (CII) proposed a 10-point agenda on Sunday to drive ease of doing business reforms. The agenda focuses on reducing the compliance burden, simplifying regulatory frameworks, and enhancing transparency.
• Among the key "urgent policy interventions," CII recommended that all regulatory approvals, at the central, state, and local levels, be mandatorily provided through the National Single Window System.
• The industry body also called for expediting dispute resolution by improving the capacity of courts and increasing reliance on alternative dispute resolution (ADR) mechanisms.
• To streamline environmental compliances, CII suggested introducing a unified framework that consolidates all requirements into a single document.

• Individuals can file their Income Tax Return (ITR) under either the old tax regime, which offers deductions and exemptions, or the new tax regime, which provides lower tax rates.
• The 2024-25 Budget increased the standard deduction for salaried taxpayers to Rs 75,000 and the deduction on family pension for pensioners to Rs 25,000 under the new tax regime.
• In the new tax regime:
• Income up to Rs 3 lakh is exempt from tax.
• Earnings between Rs 3 lakh and Rs 7 lakh are taxed at 5%.
• Earnings between Rs 7 lakh and Rs 10 lakh are taxed at 10%.
• Earnings between Rs 10 lakh and Rs 12 lakh are taxed at 15%.
• Earnings between Rs 12 lakh and Rs 15 lakh are taxed at 20%.
• Income above Rs 15 lakh is taxed at 30%.
• In the old tax regime:
• Income up to Rs 2.5 lakh is exempt from tax.
• Earnings between Rs 2.5 lakh and Rs 5 lakh are taxed at 5%.
• Earnings between Rs 5 lakh and Rs 10 lakh are taxed at 20%.
• Income above Rs 10 lakh is taxed at 30%.

• Rakesh Nangia, Founder and Managing Partner of Nangia & Co LLP, emphasised that the upcoming 2025-26 budget should aim to reduce the tax and compliance burden on both the salaried class and MSMEs to foster increased consumption and investment. He also recommended simplifying the Income Tax Return (ITR) forms and further rationalizing the capital gains tax, as well as adjusting the Tax Deduction at Source (TDS) thresholds and tax rates.
• Additionally, Nangia suggested that to encourage private sector investment, a key request from small and medium enterprises is to lower the tax rate and introduce a concessional tax rate for the manufacturing sector.

Finance Minister Nirmala Sitharaman is scheduled to present the second full budget of the Modi 3.0 government on February 1, 2025. The traditional 'halwa ceremony' will take place at the Finance Ministry's basement office, likely around Republic Day. While there is considerable speculation regarding potential changes to income tax slabs and various other measures to stimulate the economy, all questions will be answered next month when Sitharaman delivers the Budget in Parliament. Stay tuned for live updates on Union Budget 2025 expectations.