Budget 2025 and Its Impact on Indian Economy

The Union Budget, like other yearly affairs and seasons, comes every year on rotation, just like the rest of the world. Perhaps this is the most nerve-stirring executive action for the people from all walks of life, with lots of expectations, demands, deliberations, and economic forecasting, particularly since the 1990s when the general consciousness among the common people was first felt due to the intrusion of TVs on a mass scale into households. This consciousness became more vociferous after the digital revolution and the flooding of e-media with massive financial data and reports, now accessible to the majority of people through smartphones. This has fueled incredible growth in financial consciousness and activities across all demographics by disseminating millions of pieces of information in the blink of an eye. With money being central to most human endeavors, the Union Budget is now one of the most talked-about topics in society, with growing literacy and overall prosperity.

It is pertinent to first mention that the BUDGET 2025 has been unveiled at one of the most critical junctures in both the national and world economy since the BUDGET of 1991. Now, the question is: why? Because both the 1991 and 2025 budgets have nagging similarities, at least on one issue — the financial struggles of the national economy. Naturally, after 34 years, the 2025 budget has dealt with complexities and economic challenges that were hard to visualize in 1991, the watershed year when India joined the free-market economy. Much has changed in every aspect of the economy since then, from technology, industry, and agriculture to GDP growth, the rapidly changing digital financial system, the primacy of the stock market, and per capita income. The liberalization of the Indian economy has brought significant changes across every sphere without a doubt, including massive poverty eradication, which remains a prime challenge for any developing or underdeveloped economy. What we have achieved economically over the past 34 years, particularly since 2014, with the highest economic growth in the world — even beating China — is almost unthinkable, even for the most optimistic dreamers 15 years ago. Despite the unprecedented challenges posed by the COVID-19 pandemic, India has constructively and proudly proven the resilience and strong foundation of its economy. However, from the last quarter of 2024, the Indian economy has started to show recessionary symptoms, such as a stock market crash, runaway inflation, the highest unemployment in 40 years, shrinking national consumption, depleting national savings, a falling rupee, and skyrocketing national and household borrowings. Yes, these are fast-spreading black clouds in our economic horizon, and it is worth asking whether they are temporary fluctuations, as any nation’s economy will always face challenges, even the richest nations. This is the nature of an economy, which is inherently enigmatic and ephemeral. But the big question is, are these current economic woes the result of recent actions? The answer is a big NO, and we must trace the reasons by reflecting on the past 34 years in the following manner:

1. After the fall of the USSR and the Eastern Socialist Bloc in 1990, two vital things happened in the world financial system. One was the gradual establishment of U.S. hegemony, both politically and financially, and the other was the abandonment of the old system of printing money based on gold valuation, which was still prevalent in many national economies. Under constant U.S. pressure, all nations, including India, moved to GDP-based valuation, which gave governments unlimited freedom to print money at their discretion to keep trade and markets active. This policy had positive effects, leading to a sea change in the purchasing power and consumption of people worldwide, helping national prosperity extend beyond First World nations to Third World nations, including India.
2. The second crucial factor was the rapid pace of technological and scientific progress, particularly with the advent of digital technology. For the first time in human history, every aspect of human activity — from education, employment, financial activities, and production to invention — changed dramatically. Thanks to digital technology, a massive number of knowledge-based jobs were created, particularly in India, making the country a global leader in IT services exports. This created a well-off middle class and boosted national consumption, contributing to India’s world-leading GDP growth over the past five consecutive years. Additionally, technological advances made industrial goods cheaper, acting as a crucial catalyst for the domestic market boom. This led to massive private sector investments in vital economic sectors. Meanwhile, central and state governments thrived due to buoyant tax collections from high domestic consumption and exports, which funded unprecedented infrastructure development and spurred domestic and private investments, dramatically changing our industrial and financial landscape.
3. Amid these benefits, there have been some drawbacks. The circulation of cheap money, both domestically and internationally, served the interests of capitalists by filling their coffers due to the purchasing power of the growing middle and lower-middle classes. For the last 10 years, cheap money has fueled the stock markets, real estate, hospitality sectors, and manufacturing. However, these funds are now failing to reach common people, as they are increasingly concentrated in the hands of the wealthy. Investments based on past high-consumption trends have met with disappointment, as sluggish consumption continues due to the financial struggles of the general population. This has led to declining state revenue and diminishing government spending, quietly opening the Pandora’s box of economic challenges.
4. Apart from the concentration of national wealth in specific hands, these cheap monies are losing their value, both domestically and internationally. Unlike the U.S., which has enough gold reserves, or China and Europe, which have export monopolies and high incomes, India does not have the same capacity to sustain this value. The stagnation of black money, due to lax income tax enforcement, is fueling an unimaginable inflationary crisis. We are now at the twilight before a potentially devastating economic downturn.
5. Like previous budgets, the 2025 budget is filled with promises of fund allocations to various sectors, much like a kingly feast in a dream, along with tax exemptions and the additional gimmick of a NEW DIRECT TAX CODE. The stage and performances are as usual, with the same actors performing their roles. However, the plot of the drama is being rewritten by the harsh, invisible hands of the economy, which has been toying with the “Emperor of Civilization”—the economy—over the past 34 years.