Budget Chronicles: Lessons from the Past, Clues for the Future

Finance Minister Nirmala Sitharaman's budget speeches over the past five years have been a window into India's evolving economic priorities. Each budget has introduced trends that address immediate challenges and signal long-term policy directions. With Budget 2025 approaching, it's timely to reflect on key themes that have defined her tenure and to consider what might be on the horizon. Here are ten key takeaways from Sitharaman's past budget announcements that continue to shape India's economic landscape.

1. Strengthening the Digital Economy

The push for a digital-first economy has been evident in recent budgets. Programs like the expansion of Digital India, the BharatNet project for rural internet connectivity, and incentives for digital payments have catalysed financial inclusivity and innovation. In Budget 2024-25, Finance Minister Sitharman announced an allocation of ₹8,000 crore to enhance digital infrastructure, including ₹4,000 crore specifically for BharatNet's last-mile connectivity to rural areas. These efforts and the ongoing 5G rollout supported by public and private investments align with the government's vision to position India as a global technology leader and innovation hub.

2. Infrastructure Development as a Growth Catalyst 

Infrastructure has been a cornerstone of recent budgets, with capital expenditures seeing record increases. The 2024-25 budget allocated ₹11.11 lakh crore for infrastructure projects, marking a 33% increase from the previous year. This includes ₹2.4 lakh crore for railways—the highest-ever outlay—and ₹1.3 lakh crore for urban infrastructure. In her July 2024 budget speech, the Finance Minister noted, "Our enhanced focus on infrastructure investment aims to spur economic growth, reduce logistics costs, and create sustainable employment opportunities." These strategic investments are expected to unlock private capital, strengthen supply chains, and position India for long-term economic resilience.

3. Enhancing Taxpayer Experience 

Sitharaman's budgets have consistently prioritised simplifying tax compliance and improving transparency for taxpayers. In her 2020 budget speech, she introduced a taxpayer charter, committing to a "fair, transparent, and taxpayer-friendly tax regime."  The 2021 rollout of a next-generation IT filing system enabled pre-filled tax forms and faster refunds, significantly reducing the average tax return processing time to 10 days by FY 2023-24.In her 2023 speech, she highlighted, "Improved digital infrastructure ensures ease of compliance and faster resolutions." Additional reforms, such as introducing the Annual Information Statement (AIS) in 2022, have provided taxpayers with a detailed overview of their financial transactions, enhancing transparency. The 2024 proposal to rationalise the Income-tax Act of 1961 reflects a broader effort to make the tax system concise and user-friendly, reaffirming the government's commitment to a more straightforward, more efficient tax framework.

4. Empowering MSMEs 

Micro, Small, and Medium Enterprises (MSMEs) have been central to the government's efforts to boost job creation and economic resilience. Recognising their role in contributing over 30% to India's GDP and nearly half of its exports. Sitharaman's budgets have introduced measures to strengthen this sector. The 2024-25 budget allocated ₹9,000 crore to revamp the credit guarantee scheme, which would facilitate collateral-free loans and reduce credit costs by 1%. In her 2023 speech, the Finance Minister highlighted initiatives for promoting digital solutions and skilling programs tailored for MSMEs. Additionally, efforts like the Raising and Accelerating MSME Performance (RAMP) program and linking MSMEs with e-commerce platforms have aimed at fostering growth, innovation, and global market access for this crucial sector.

5. Advancing Green Energy Goals

Sustainability has emerged as a key focus in Nirmala Sitharaman's budgets. Initiatives such as the National Green Hydrogen Mission, highlighted in her 2023 budget speech, received a ₹600 crore allocation in 2024-25 to reduce fossil fuel dependence and carbon emissions. Similarly, the government's ₹15,000 crore allocation for sustainable steel production in the 2024-25 budget attempts to decarbonise one of the most energy-intensive industries. Electric vehicle (EV) adoption remains a top priority, supported by a ₹10,900 crore incentive scheme announced in her 2022 speech to promote EV manufacturing across all segments, targeting 30% penetration by 2030.

6. Enhancing Healthcare Accessibility 

Public healthcare spending has steadily increased, focusing on universal health coverage and disease eradication. Campaigns like the tuberculosis elimination program and expanded vaccination drives, announced in the 2020 budget, demonstrate this commitment.

The 2024-25 budget allocated ₹86,175 crore to the Ministry of Health and Family Welfare, marking an increase of nearly 13% from the previous year. This includes additional funding for rural healthcare infrastructure, addressing gaps in primary health centres and enhancing diagnostics in underserved regions.

In her 2023 speech, Sitharaman emphasised, "Health and well-being continue to remain a priority in our governance framework." Investments in programs like Ayushman Bharat and Mission Indradhanush have further improved access to affordable healthcare.

7. Employment Generation and Skilling 

Job creation has been a consistent priority, with a strong focus on skilling and empowering India's workforce. The revamped PMKVY (Pradhan Mantri Kaushal Vikas Yojana) introduced in Budget 2023-24 aims to train lakhs of youth in industry-relevant skills, particularly in sectors like renewable energy, robotics, and artificial intelligence.

The 2024-25 budget also announced a ₹2 lakh crore employment generation program targeting rural areas and emerging industries. In her 2023 speech, Sitharaman remarked, "Our focus is to equip youth with skills for today's and tomorrow's opportunities, enabling their active participation in India's growth story." These efforts align with the government's vision of creating a future-ready workforce.

8. Evolution of the New Tax Regime  

Introduced in Budget 2020, the new tax regime has been continuously refined to encourage adoption. It offers lower tax rates without exemptions, aimed at simplifying taxpayers' compliance. In her 2024 budget speech, Sitharaman raised the no-tax threshold to ₹7 lakh for individuals Additionally, the maximum tax rate under the new regime was reduced from 42.74% to 39% to benefit high-income earners. These changes reflect the government's goal of transitioning to a clean, exemption-free tax structure to minimise complexities and promote greater transparency in personal income tax systems.

9. Capital Gains Tax Reforms  - H3 Tag

Recent budgets have focused on simplifying capital gains taxation, aiming to harmonise holding periods and rates across asset classes. In her 2024 budget speech, Sitharaman proposed standardising holding periods into two categories: 12 months for short-term and 24 months for long-term assets. Additionally, short-term capital gains are now taxed at a flat 20%, while gains from debt instruments continue to follow individual slab rates. These measures encourage greater participation in financial markets by offering predictability and simplifying investor compliance.

10. Focus on Education and Research  

The emphasis on education and research has grown significantly. The 2024-25 budget allocated ₹1.12 lakh crore for education, marking a 10% increase from the previous year. Initiatives like the National Digital Library aim to provide students with free access to quality resources, while the Indian Institute of Heritage fosters research in cultural preservation. In her 2023 speech, Sitharaman stated, "Education is the foundation for building a knowledge-based economy." The government's push for teacher training programs, digital learning platforms, and skill development courses reflects its commitment to creating a globally competitive workforce and driving innovation-led growth.

What to Expect in Budget 2025-26 - H2 Tag

As Sitharaman prepares to present the Budget 2025-26, several themes and priorities are anticipated, reflecting India's ongoing economic challenges and opportunities:

1. Income Tax Relief: Experts suggest the government may increase the basic exemption limit under the new tax regime to ₹5 lakh. Additionally, EY India anticipates enhancing the standard deduction to ₹75,000 and possible tweaks to tax slabs to boost disposable incomes. 
2. Healthcare Expansion: Recent reports indicate that the government may increase healthcare spending to improve rural infrastructure and introduce measures to make health insurance more affordable. Policies targeting preventive healthcare and medical technology innovation could also feature prominently.
3. Infrastructure Push: With global economic uncertainties persisting, infrastructure spending is expected to remain a focal point. According to a note from Deloitte India, a 20-25% increase in allocations for capital expenditure is likely, particularly for roads, railways, and renewable energy projects. 
4. MSME Revival Measures: The government will likely introduce additional credit and technology adoption schemes for MSMEs, recognising their critical role in economic recovery. Reports from FICCI suggest targeted fiscal support for export-oriented MSMEs to enhance competitiveness.
5. Green Transition: Expanding incentives for green hydrogen production, EV adoption, and renewable energy infrastructure are expected to align with India's net-zero targets. Industry leaders also anticipate more funding for climate adaptation projects in vulnerable regions.
6. Digital Infrastructure Development: Investments in AI, fintech, and blockchain technology could take centre stage as India positions itself as a global digital innovation hub. Reports highlight the likelihood of schemes supporting digital skilling and entrepreneurship.

Budget 2025-26 could serve as a blueprint for inclusive and sustainable growth, addressing immediate needs and long-term aspirations. Sitharaman's budget will be closely watched for its vision for a nation in transition.