India Unveils Tax Relief to Boost Middle-Class Spending, Cuts Fiscal Deficit Target

TDT | Manama

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In a bid to stimulate economic growth and enhance the spending power of the middle class, India has announced tax relief measures, alongside a series of initiatives aimed at bolstering investment and exports. Finance Minister Nirmala Sitharaman presented the annual budget on Saturday, outlining key reforms to support economic momentum amid concerns over slowing growth and rising inflation.

Among the major announcements, the government has decided to reduce personal income tax rates, a move aimed at increasing disposable income and revitalizing consumer demand. The decision comes as the world’s fifth-largest economy braces for its slowest growth in four years, hindered by weak urban demand and sluggish private investment. High food inflation has also posed a challenge, constraining household budgets and dampening purchasing power.

The budget also sets a lower fiscal deficit target for the upcoming financial year, projecting it at 4.4% of GDP for 2025-26, down from the current 4.8%. The reduction aligns with the government’s broader fiscal consolidation strategy while maintaining space for growth-oriented expenditure.

Additionally, Sitharaman announced ambitious missions to boost farm productivity, expand manufacturing, and enhance exports. These initiatives are designed to attract private investment and strengthen key sectors of the economy.

In a significant policy shift, the government has raised the foreign direct investment (FDI) limit in the insurance sector to 100% from the previous cap of 74%. This move is expected to attract substantial foreign capital and enhance competition, further strengthening India’s financial services sector.

The budget reflects the government’s focus on striking a balance between fiscal prudence and economic stimulus, as it seeks to navigate global uncertainties and domestic economic challenges in the coming year.