Mon Feb 03 09:32:17 IST 2025: ## India’s Budget Aims to Boost Economy with Tax Cuts

**New Delhi, Feb 3, 2025** – The Indian government’s significant income tax cuts, announced in the recent budget, are designed to revitalize the slowing economy and address public concerns, according to Finance Secretary Tuhin Kanta Pandey. The move, which will reduce government revenue by ₹1 lakh crore, makes annual incomes up to ₹12 lakh tax-free and adjusts tax slabs and rates.

Pandey stated that while the government recognizes public “angst” regarding the economy, the tax cuts are intended to stimulate demand, savings, and investments across the board. He believes the resulting economic boost will be substantial, arguing that distributing wealth will ultimately increase it. The increased disposable income, he explained, will allow individuals to spend on various goods and services, boosting various sectors of the economy. Savings will also benefit the economy, increasing bank deposits and supporting crucial sectors like MSMEs. Finally, the increased disposable income is likely to lead to increased private investment in areas such as housing construction.

While the Finance Secretary declined to quantify the potential growth increase resulting from the stimulus, he noted that the effect will depend on the balance of consumption and investment. He emphasized that in the current economic climate, any boost will be beneficial. The budget, he added, is “absolutely non-inflationary,” maintaining a fiscal deficit of 4.4% of GDP. He also clarified that public capital expenditure is significantly higher than initially perceived, totaling around ₹20 lakh crore, including central and state spending, and contributions from public sector firms.

Regarding the possibility of an interest rate cut by the Reserve Bank of India (RBI) this week, Pandey said he would not speculate but noted that the RBI’s stance suggests a potential rate cut as inflation decreases.

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