In a detailed address on Monday, Finance Minister Nirmala Sitharaman clarified that the recent income tax exemptions announced in the Union Budget 2025 do not indicate a shift in the government’s fiscal strategy from capital expenditure (capex) toward consumer spending. Responding to queries following the announcement that individuals earning up to ₹12 lakh per annum would be exempt from income tax, Sitharaman emphasized that infrastructure development and public investment remain central priorities. She dismissed speculations that the tax relief was primarily intended to stimulate consumption after India recorded two consecutive quarters of slow GDP growth. Highlighting the government’s continued focus on long-term development, she pointed out that the 2025 budget has increased capital expenditure by 10.2 percent, with a total allocation of ₹11.21 lakh crore, including significant investments by public sector enterprises.
Sitharaman elaborated that Prime Minister Narendra Modi personally supported the ₹12 lakh tax exemption initiative, viewing it as a policy measure to enhance taxpayer savings, investment capacity, and spending power simultaneously. The Finance Minister underscored that the relief is part of a broader, balanced economic approach designed to strengthen both consumer welfare and national infrastructure.
Addressing concerns about recent sell-offs in Indian equity markets by Foreign Institutional Investors (FIIs), Sitharaman reassured that such movements are largely due to profit-booking—a standard market behavior in response to robust returns. Finance Secretary Tuhin Kant Pandey added context, noting that FIIs often repatriate funds to their home markets, particularly the United States, during periods of global financial uncertainty. Despite these fluctuations, India continues to be the fastest-growing major economy, and investment interest in the country remains strong.
Economic Affairs Secretary Ajay Seth further clarified that stock market volatility is influenced by a combination of global and domestic factors rather than specific policy decisions, emphasizing that government intervention is not immediately required. Sitharaman also highlighted India’s increasing investor-friendliness, citing customs duty reforms introduced in the budget to attract foreign direct investment.
Post-pandemic, the government remains committed to capital asset creation to ensure sustained economic stability and robust infrastructure development. Sitharaman noted that the total capital expenditure for 2025-26 is projected at ₹16 lakh crore, including investments by public sector undertakings, reinforcing that infrastructure development continues to be a priority alongside taxpayer relief. She reiterated that the budget is fundamentally growth-oriented, aiming to balance immediate financial benefits for individuals with long-term economic resilience through infrastructure and capital investments.
This approach, she stressed, demonstrates the government’s intent to maintain fiscal discipline, encourage investment, and support inclusive growth while providing direct relief to a broad segment of taxpayers, ensuring that both consumer welfare and national development goals progress in tandem.
