Budget 2025-26: Some Thoughts
Dr TV Gopalakrishnan 03 January 2025
An egalitarian society cannot thrive if wealth is concentrated in the hands of a few while many remain in poverty. 
 
As finance minister (FM) Nirmala Sitharaman prepares to present her seventh Budget, the nation is abuzz with hope, anticipation and excitement. Everyone—from industry leaders to small farmers, from corporations to everyday citizens—wonders how the Budget will shape their future. So far, successive budgets from the finance minister have proven beneficial and prudent to the economy, keeping the fiscal deficit under control and propelling the economy towards fast growth. 
 
Thanks to a disciplined fiscal stance by the government of India and innovative monetary policies by the Reserve Bank of India (RBI), our nation has weathered global challenges, from the COVID-19 pandemic to geopolitical upheavals. While the achievements are significant and point toward the goal of becoming a top global economy by 2047, we must also acknowledge the widening gap between the rich and the poor. Ensuring that growth uplifts all sections of society remains our collective responsibility.
 
With this background, there is immense optimism that the upcoming Budget could be a true 'dream Budget', accelerating progress for everyone. Here are some thoughts which can make a meaningful difference in realising our vision of Viksit Bharat.
 
1. Stimulating Mass Consumption To Drive Growth
 
Mass consumption of goods and services sparks the virtuous cycle of investment, employment, production, demand and supply. To sustain this cycle, there is an urgent need to control production costs, keeping costs low and encouraging both local and foreign investment.
 
Manage inflation: Stable or moderate inflation ensures that increased incomes truly benefit people.
 
Balance resource needs: While the government must mobilise funds for infrastructure and public services, it should do so without unduly burdening ordinary citizens. Achieving this balance is challenging but essential if we want to fulfil our dream of a developed India.
 
2. Rationalising and Strengthening Tax Policies
 
To finance our ambitious development agenda, the government needs robust revenue. This calls for:
 
Review of tax rates and structures: Simplify and rationalise taxes to ensure fairness and sufficient revenue. Curb tax evasion by embracing technology, artificial intelligence (AI) and better regulatory oversight to clamp down on elusive tendencies and practices. Promoting tax awareness by educating citizens, businesses and other stakeholders on the importance of tax compliance, incentivising taxpayers and eliciting the cooperation of an informed and enthusiastic public is key to broadening the tax base. A participative approach—where policy-makers, professionals, academics and industry leaders collaborate—can help craft pragmatic and inclusive policies.
 
3. Bridging the Gap between Cost of Production and Cost of Living
 
Keeping the cost of production low is a specialised art based on the linkages of lots of variables, like cost of land, materials, labour, interest, time and all connected logistics till the products reach the consumers. The impact of inflation on the cost of production is also a factor which cannot be overlooked. The cascading effect of costs on various variables has an inflationary impact affecting the prices, the demand and supply.
 
When inflation, particularly in essential commodities, remains high, it disproportionately hurts the less privileged. Aligning incomes and inflation is crucial to ensure wage growth keeps pace with the rising cost of living so that economic gains reach every household. 
 
4. Fostering Wealth Creation with Responsible Distribution
 
While the country’s GDP growth, though a bit low, is impressive, it should translate into tangible benefits for all. Encouraging wealth creation and its redistribution calls for all-round attention and continuous monitoring. National wealth creation must go hand-in-hand with ensuring equitable distribution. Tax policies should reflect this commitment in letter and spirit. The Budget should address narrowing the rich-poor divide by creating an environment that fosters growth for every segment of society, not just the affluent. Special and very conscious efforts have to be taken to address all sorts of indirect costs, misuse of public funds, corruption, black money and losses from underperforming institutions that weigh heavily on taxpayers and drive up inflation. Tackling these effectively will free resources for vital public investments.
 
5. Unleashing the Power of Demand
 
High-sounding numbers and statistical jugglery have limited effect if people can’t afford the goods and services they need. We must promote financial inclusion. Banks and financial institutions should be proactive in expanding credit and supporting enterprises particularly at grassroots levels.
 
Boost consumer confidence: When consumers have the means to spend, the entire economic cycle—from producers to sellers—thrives, fuelling employment and further consumption.
 
Leverage technology: Harness artificial intelligence (AI) and digital solutions to streamline operations and make credit flows quicker, safer and more inclusive. The budget can introduce targeted incentives for both financiers and borrowers to keep this virtuous cycle running smoothly.
 
6. Simplifying the Tax Regime
 
A simpler, more transparent tax system would benefit everyone:
 
Fewer tax categories: Consider consolidating taxes so that citizens face fewer rates and rules.
 
Transaction tax + comprehensive GST:  A single transaction tax on all receipts and payments, supported by a holistic and definitely not hostile as at present GST, could reduce complexity, widen the tax base and curb evasive practices. People should welcome and volunteer to pay taxes for the nation's progress. 
 
Income tax as a supplement: Let income tax remain only as an additional resource, applied in a clear, justifiable manner.
 
7. Strengthening Governance and Accountability
 
Tax collection and distribution should be transparent, traceable and accountable. This calls for:
 
Strong bureaucracy and efficient administration: Build a mechanism that ensures fair allocation of tax revenues among states, infrastructure, security and other national priorities. Disincentive freebies, by all means, to bring in meaningful and healthy fiscal prudence. Result-oriented governance can bring in huge benefits all around. Link revenue collection and public expenditure to tangible, measurable benefits for citizens. 
 
Robust vigilance and technology: Leverage advanced tools to eliminate fraud and corruption, thereby safeguarding both citizens and the national exchequer.
 
8. Embedding ethical values in business and public life
 
High ethical standards—rooted in our cultural heritage—are key to sustainable development. We should:
Encourage responsible pricing and customer care: Service sectors, from travel to hospitality, must be fair and people-centric.
 
Reward compliance and discourage freebies: Offer incentives for honest tax practices, while disincentivising wasteful public spending that imposes an unfair burden on taxpayers.
 
Integrate social audits: Eminent social reformers and experienced professionals should help monitor and evaluate the moral and social impact of businesses and public institutions.
 
When institutions and individuals alike commit to these ethics, the country’s global image and societal well-being both thrive.
 
Conclusion
To build a strong and equitable economy, we need a Budget that inspires all citizens—across every socio-economic level—to participate in nation-building. By combining technological innovation, simplified tax structures, ethical governance and a genuine commitment to uplift every Indian, we can ensure that the economy performs, grows equitably and all the segments of the society benefit by minimising the ugly rich and uplifting the poorest of the poor. May the Budget bring benefits and welfare measures for all.  
 
(Dr TV Gopalakrishnan is retired chief general manager of Reserve Bank of India-RBI)
 
Comments
yerramr
2 weeks ago
The article is well -written. Hope the FM will listen.
parimalshah1
2 weeks ago
Three suggestions: 1) Have prebudget meeting with middle class representatives as well, and not only corporates and business leader. 2) Gradually wean the people off the freebies culture. 3) Simplify direct tax for individuals - annual income up to 15 lakh no tax, no exemptions, no deductions. For 15 to 25 lakh income tax at 5% and for more than 25 lakh 10%. This will increase tax net as well as compliance. And of course, must tax wealthy farmers as well with more than 25 lakh annual income.
gopalakrishnan.tv
Replied to parimalshah1 comment 2 weeks ago
Thank you Mr Parimalshah. Good thoughts and practical suggestions to spread the tax net and better Compliance. When GST and other taxes are in place , the very continuance of Income Tax is to be examined. What the Govertnment wants is only revenues and that should be raised from well off society without any exception and spreading to all segments of the population even the poor in a fair and transparent manner.
malibala1950
2 weeks ago
My suggestion on Budget 2025
1. Fiscal Discipline
Introducing targeted fiscal policies that enhance disposable income for middle and lower-income groups can significantly stimulate broad-based economic growth.
Proposed Budget Actions:



Gradually raise the income tax exemption limit from the current ?2.5 lakhs and ?3 lakhs to ?5 lakhs and ?10 lakhs over two years.

Increase the exemption limit for senior citizens to ?10 lakhs.


2. Inflation Control



Enforce strict price controls on essential commodities, with stringent punishment for offenders, including non-appealable sentencing provisions.

Promote exports through incentive schemes such as the Production Linked Incentive (PLI) for incremental exports.

Strengthen the Indian Rupee and provide the RBI Governor with full autonomy to set and achieve inflation control targets. Replace underperforming Governors to ensure accountability.


3. Other Economic Measures



Simplify tax laws for ease of compliance and transparency.

Establish special courts to expedite resolution of disputed tax arrears and boost direct tax collection.

Designate special courts for economic offenses to ensure swift justice and strict penalties for offenders.

Gradually reduce GST rates on essential items.

Enact legislative reforms to prohibit political parties from offering freebies for votes.


gopalakrishnan.tv
Replied to malibala1950 comment 2 weeks ago
Thank you .I agree with your suggestions on fiscal discipline and giving autonomy to RBI . Inflation control requires more of Administrative measures and political will to stop freebies and manipulation of prices of commodities. Corruption and malpractices without fear of laws of the country cannot be solved by RBI . GST requires an over all review and it needs to be drastically simplified . Strengthen and rationalise GST and remove all other forms of taxes and levies . Income tax also needs a relook and if possible should be replaced by transaction tax .

kenchegowdalingaiah1
3 weeks ago
The article highlights several important aspects that
need to be taken note of in formulation of the forthcoming union budget. We know that usual pre-budget consultations must be in progress. Given the fact that this Government has the compulsion of meeting demanding wishes of coalition partners besides that of other vocal lobbies, It is no doubt a onerous task of balancing competing interests in distributing limited resources. Let us hope that this budget will come out with some innovative ideas to do this balancing act.
mgwarrier
3 weeks ago
Budget 2025-26 will unfold a new perspective on the development trajectory of India. At least that is the expectation. This article covers several significant aspects that will engage the prebudget deliberations during the coming days.
Contributors of articles and readers here can support Team Sitharaman by sharing their views.
Let me make a beginning by sharing my thoughts on Social Security which needs to be a Budget priority :
"India has accepted universal social security as a responsibility of government and interwoven all its ingredients in the Constitution. As it seemed a distant goal, the enabling provisions were included in Directive Principles and most of them are not legally enforceable.

This position resulted in food security, health insurance and pension system becoming dependent on the magnanimity of the central and state governments of the day.

As of now there is total awareness about the need to factor in the elements of all ingredients of social security in the real wages across sectors.

The present arrangements need to be institutionalised by reorganizing and overhauling the food production, procurement and supply systems including ration, PF and Pension Systems and old age care. Let's focus on these priorities in the coming year.

M G WARRIER
gopalakrishnan.tv
Replied to mgwarrier comment 3 weeks ago
Thank you Mr Warrier for offering sensible comments. Provision of social security I feel is interlinked with economic security. Once minimum economic security is guaranteed , social security can easily be made possible and strengthened to satisfy the political ,economic and even technological needs. Prevalence of freebies, corruption, black money , multiple taxes practically touching from salt to camphor affect the not only the masses but all segments of factors of production with cumulative and compounding effect taking away the very charm and good intentions of moving the economy forward in practice. The tax atmosphere should be very conducive and encourage , motivate every one associated with the economic development to contribute . Loka samastha Sukhno bhavanthu is a necessity to make the economic progress a reality.
mgwarrier
Replied to gopalakrishnan.tv comment 3 weeks ago
I agree. There is a need to integrate resources mobilization and end use in a transparent manner. Those, including the workers and owners of large corporates should be convinced that the costs, prices and income policy is corruption-free and their contribution is helping economic development.

Taxes, as of now, are recognised only as a source of income. Taxpayers should be convinced that nation is benefted from the taxes paid. Simple example is, tolls and road taxes should be proportionate to services provided and maintenance of good roads and transport system
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