The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has been unveiled amid growing concerns about inflation and a slowdown in consumer spending. The big question remains: has the government done enough to support the middle class in these challenging economic times?
One of the most significant takeaways from this year’s budget is the increase in the income tax exemption threshold from ₹6 lakh to ₹12 lakh per annum. This move is expected to ease the tax burden on a vast segment of salaried individuals and improve disposable incomes. Additionally, tax slabs have been slightly restructured to ensure more savings for taxpayers, which could, in turn, boost spending and overall demand in the economy. However, a large portion of India’s middle class, especially those in the informal sector or earning below the exemption threshold, may not directly benefit from these changes.
Despite these tax reforms, the middle class continues to struggle with rising prices of essential commodities like flour, lentils, vegetables, fruits, cooking oil, and spices. Inflation has eroded purchasing power, making it difficult for families to maintain their standard of living. This decline in consumption is one of the key reasons India’s GDP growth has slowed from 8.2% last year to 6.4% this year, with consumer spending contributing significantly to the dip. Given that middle-class households drive a substantial portion of the economy, their reduced spending power has broad implications.
While income tax relief is a step in the right direction, some experts argue that reducing the Goods and Services Tax (GST) on essential goods could have been a more direct and inclusive approach to providing financial relief. However, since GST rate adjustments fall under the jurisdiction of the GST Council and not the Union Budget, no immediate changes were announced. The 55th GST Council meeting last month did recommend certain tax cuts, such as reducing the GST rate on fortified rice kernels to 5% and exempting gene therapy treatments, but larger-scale reductions on daily necessities remain absent from policy discussions.
Apart from tax relief, the budget also focused on infrastructure development, digital payments, and startup incentives. Increased investments in infrastructure could create more jobs, indirectly benefiting middle-class families. Similarly, expanding digital financial services may improve accessibility to credit and banking facilities. However, these measures offer long-term advantages rather than immediate relief from rising living costs.
The government has also announced schemes to boost affordable housing, which could benefit middle-class families looking to purchase homes. However, the effectiveness of these schemes will depend on their implementation and accessibility, especially in tier-2 and tier-3 cities where housing affordability remains a major concern.
In conclusion, while the Union Budget 2025 introduces tax relaxations and long-term economic initiatives, it falls short of addressing the immediate financial strain caused by inflation. A combination of direct tax relief and indirect tax reductions, along with targeted subsidies on essential goods, might have provided more comprehensive support. The middle class remains the backbone of India’s economy, and ensuring their financial well-being is crucial for sustained economic growth. The question now is: will these measures be enough, or does the government need to do more in the coming months?
