Budget: Govt faces choice between economic stimulus and structural reforms

The former could take the form of a tax cut, while the latter could involve a stimulus targeted at specific segments of the economy, particularly those linked to employment generation

The Budget for 2025-26 is due to be presented tomorrow, and as usual, there are many expectations from the finance minister. One oft-repeated request is to reduce income tax rates. Any policy changes in the Budget need to be viewed in the context in which it is being presented. For the forthcoming Budget, three broad headwinds need to be taken into account.

 

First, there is an observed moderation in the growth rate. A steady decline in quarterly growth rates has been reported, with growth for Q2 in FY 2024-25 being pegged at 5.4 per cent. The first advance estimates for