Union Budget 2025: Nirmala Sitharaman’s eighth budget has to overcome global economic slowdown

On 1st February 2025, Union Finance Minister Nirmala Sitharaman will present her eighth consecutive Budget before the Parliament. This significant Budget comes at a time when India’s GDP growth is projected to decelerate sharply to 6.4 per cent in FY25, down from 8.2 per cent in FY24. This projection follows a concerning shocker in the July-September quarter, when India’s GDP grew by just 5.4 per cent.

However, as the saying goes, “Hope shines brightest in the darkest times”, there is optimism that Budget 2025 will be the much-needed catalyst to reverse this downward trend and stimulate a much-needed recovery in the economy. The Budget will play a critical role in shaping India’s ambition to achieve a $7 trillion economy by 2030, a goal that will require strategic fiscal decisions and bold reforms.

Union Budget 2025 will need to reflect the government’s priorities, building upon the successes of previous reforms while introducing new initiatives that are aligned with the country’s long-term development goals. A key area of focus will be investment in infrastructure, which is essential for driving the accelerated and inclusive socio-economic development of the nation.

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The government’s commitment to infrastructure development has been evident in recent years, with capital spending on infrastructure rising significantly—from just 1.63 per cent of GDP in FY2019 to an expected 3.4% in FY2025. As India aims to realize its vision of a Viksit Bharat by 2047, it is expected that the government will continue to prioritize year-on-year increases in capital investment in the infrastructure sector, ensuring that this critical area remains a cornerstone of India’s economic growth.

Transportation is an indispensable element of a country’s infrastructure, with a direct bearing on economic progress, social development and global integration. There is likely to be a strong focus on enhancing logistics infrastructure, including investments in roads, highways, railways and ports.

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With the successful monetization of highways by the NHAI, it is expected that capex will be allocated towards other logistics infrastructure. Establishment and expansion of logistics parks and warehousing facilities across key locations in the country are expected to receive attention. These hubs will streamline supply chains and improve storage and transportation efficiencies.

The Budget could also significantly prioritize enhancements in port infrastructure, shipping, and inland transport systems, aligning with the “Maritime Amrit Kaal Vision 2047,” which aims to quadruple port capacity to approximately 10 billion tones by 2047, supporting a projected five-fold increase in traffic at Indian ports.

There is a strong emphasis on urban development, with expectations centered around enhancing capital expenditure. Rapid pace of urbanization is transforming the landscape of Indian cities, giving rise to smart cities. It is anticipated that Budget 2025 will prioritize sustainable urban planning practices, including investments in green infrastructure, water conservation, and waste management.

The energy sub-sector emerges as a critical component of the infrastructure landscape, with heightened focus on renewable energy sources and rapid commercialization of advanced biofuels such as sustainable aviation fuel, bio-hydrogen, etc.

PM Surya Ghar Yojana is a noteworthy government initiative aimed at promoting renewable energy and making rooftop solar installations more accessible. Providing financial assistance or low-interest loans could further alleviate high upfront costs, encouraging faster adoption of solar energy across India.

Additionally, tax benefits for green financing instruments such as interest / capital gains tax exemption or reduced tax rate could be provided on green debt securities to boost investment in India. Incentives such as interest support for green projects and deposits, could also be implemented.

The Budget is also likely to prioritize enhancing connectivity and streamlining operations to support government’s “Digital India” vision. The Centre could allocate significant resources towards the expansion of 5G technology, which is crucial for enabling advanced applications in sectors like IoT and AI.

Alongside government funding, Public-Private Partnerships (PPPs) are vital for the development of the infrastructure sector. Sovereign Wealth Funds (SWFs) and Pension Funds (PFs) are key drivers of private investment in any country. Given India’s substantial funding needs, its medium-term growth prospects, its well-established and transparent legal framework, and the depth of its financial markets, there is a natural alignment between PFs/SWFs and investing into India. It is expected that the government shall extend the tax exemption available to these investors with a view to further enhancing the flow of long-term patient investment into India’s infrastructure sector.

In conclusion, Budget 2025 is expected to play a pivotal role in shaping the future of India’s infrastructure sector. With a strong focus on enhancing connectivity, promoting sustainability, and fostering public-private partnerships, the government aims to address the growing demands of urbanization and economic growth. Strategic investments in transportation, logistics, and green infrastructure will not only improve the overall quality of life for citizens but also bolster India’s position as a global economic powerhouse. By prioritizing efficient and inclusive development, the budget is poised to set the stage for a more resilient, modern, and sustainable infrastructure landscape.

Nandita Tripathi is Partner, Deloitte India; Nishant Bajaj is Associate Director, Deloitte India and Gourav Mittal is Associate Director, Deloitte India. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.