Tax tweaks, employment schemes— ICICI Bank lists 6 key themes that may dominate Budget 2025 | Stock Market News

With the Union Budget just a few days away, speculations are high about what Finance Minister Nirmala Sitharaman may announce on February 1 to stimulate economic growth and boost consumption.

Budget 2025 is expected to strike a balance between fiscal prudence and economic growth. Amid slowing manufacturing activity, weak urban consumption, and rising global protectionism, India requires a budget that prioritises growth to get it closer to becoming an economic superpower.

Experts at ICICI Bank highlight the following six key themes that are expected to dominate the upcoming Budget. Let’s take a look.

Budget 2025: Key expectations

1. Tweaks in tax rates: According to ICICI Bank, the government may focus on putting more money in the hands of consumers due to moderate wage growth in corporate India and relatively high food inflation.

“We expect the government to tweak the income tax rates and announce measures to make the new tax regime even more attractive in the upcoming budget,” the bank said.

The bank also expects further changes in customs duty to bring down the inverted duty structure and improve the competitiveness of Indian manufacturing.

2. Continued emphasis on rationalisation of revenue expenditures: ICICI Bank pointed out that since FY22, the government has focused on rationalising revenue expenditure growth and improving the quality of expenditures.

According to the bank, revenue expenditures for several ministries, such as Jal Shakti, Housing and Urban Affairs, MSME, Labor and Employment, and Electronics and IT, have been running behind long-term trends.

On the other hand, the Ministry of Chemicals and Fertilizers, Communication, Home Affairs, and Railways could see revenue expenditure overspend during the year.

3. PLI allocation could remain muted: ICICI Bank expects continued emphasis on expanding the production-linked incentive (PLI) scheme in electronics and other labour-intensive sectors, such as textiles, along with schemes focusing on MSMEs, to propel job creation.

4. Employment generation may remain a focus area: ICICI Bank believes the government will keep its focus on schemes for better employment opportunities in the country, given India’s demographic dividend.

“In addition to job-linked incentives, the focus on skilling is also likely to continue to ensure faster employment for the youth of the country,” the bank said.

5. Roads ministry, capex loans to states could see higher allocation: In FY26, ICICI Bank expects the government to peg capex at ₹11.5 lakh core, a 15 per cent increase over FY25 actuals.

“This would take capex to 3.2 per cent of GDP, a tad higher than the level likely to be achieved in FY25 (3.1 per cent of GDP). In line with past trends, three major areas, viz. roads and highways, railway and defence, are likely to receive the lion’s share of the capex allocation,” said the bank.

6. Fiscal deficit target may be at 4.5 per cent of GDP in FY26: ICICI Bank believes the government is likely to project a fiscal deficit of 4.5 per cent of GDP next year and actual number could be even lower.

However, given the economic slowdown, the bank believes the government is likely to reduce the magnitude of fiscal consolidation this year to 0.3 per cent of GDP.

“This implies a fiscal deficit of ₹16.1 lakh crore, net borrowing of ₹12.1 lakh crore and gross borrowing of ₹14.8 lakh crore. After this, it is very likely that the government moves to debt-to-GDP as an anchor of fiscal policy,” said ICICI Bank.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.