Budget 2025 surrounded by American challenges brings prosperity to the middle class and the corporates
Anant Mittal February 01,2025
Finance Minister Nirmala Sitharaman increased the proportion of cash in the hands of the middle class by giving income tax relief in her eighth Union Budget, but dashed the hopes of the poorest and the lower middle class including the lowest strata. While the Finance Minister has reduced customs duty on import of many goods and services, she has also expressed her intention to cut down on the accident liability provisions under the nuclear agreement with the US.
The question is whether this initiative is not a result of US President Donald Trump’s threat to impose heavy tariff rates on India? Similarly, a loss of Rs 1 lakh crore was claimed in the budget speech in giving relief to the middle class by redefining the personal income tax system including making income up to Rs 12 lakh per annum income tax free, but the Finance Minister did not have the courage to compensate for it by increasing the corporate tax rate from 22 percent. Because private capital investment is still stuck between 21 to 24 percent, while the huge cut in corporate tax was to provide more money in the hands of capitalists for new capital investment. The slow rate of private capital investment has also reduced the rate of public capital investment by 0.9 per cent in the last five years. This is because of the reduced income due to the rate of government revenue collection due to the reduction in corporate tax.
New airports or corporate love
The entire emphasis in the budget speech is based on privatisation and increasing corporate profits due to Prime Minister Narendra Modi’s love for corporates. Whether it is the intention to build more than 100 new airports and runways announced in the budget or the measures to expand the shipping industry, the benefits of all will ultimately fall in the lap of capitalists.
However, the Modi government has copied the Congress’ 2024 election manifesto to give the budget a pro-people touch by increasing the scope of tax exemption, loan and business financial limits and social and nutritional security for gig workers, women, start-up enterprises, micro, small and medium enterprises.
It is worth noting that after becoming the Prime Minister with the grace of NDA after winning only 240 Lok Sabha seats in the general election 2024, in the budget of July last year, Narendra Modi had borrowed the model of one crore apprenticeships in five years and skilling the youth and making them efficient from the Congress manifesto. It is clear from this that despite supporting the opposition parties including the Congress to get power, Prime Minister Modi has to improve his corporate-loving image with the help of their welfare measures.
In the latest budget, the Defense Ministry has been allocated the highest amount of 3.44 percent i.e. Rs 6.5 lakh crore. A large amount of this will be spent on the capital item i.e. making weapons in the country and buying new weapons from multinational companies. The contract to make new weapons and defense equipment in the country is now being given to most private companies, including Adani and Ambani. However, this time the Modi government may have to give preference to American companies in the purchase of technology-intensive i.e. sensitive defense equipment.
Because in his very first conversation with Prime Minister Modi, US President Trump has already warned him to increase the purchase of defence equipment from America. This seems to be the case from the excerpts of the first conversation between the two leaders after Trump became President again, which have been made public. According to these excerpts, Trump has asked India to increase the import of manufactured goods and defence equipment from America by reducing the customs rates. If this is not done, he has called India a ‘tariff king’ and warned of imposing 100% customs duty on goods imported from us to America.
Now it remains to be seen whether India, which has surrendered in the matter of continuing international trade in dollars, will try to gain something in return for implementing Trump’s other warnings or will surrender. Here, it is relevant to evaluate the budget announcement of reconsidering the liability provisions of the company installing the nuclear reactor in connection with the announcement of setting up five new nuclear power plants in the context of Trump’s pressure. Because the implementation of the historic Indo-US nuclear agreement made by Dr. Manmohan Singh’s UPA government has been hanging fire for the last 16 years due to Indian rules regarding the complete liability of the company installing the nuclear reactor.
None of the companies installing nuclear reactors in American and European countries is ready to bear the entire responsibility of compensation in case of an accident. For this reason, implementation of the Indo-US peaceful nuclear agreement and construction of new nuclear power plants in India by installing nuclear reactors from there could not be possible even after a decade and a half. It remains to be seen how the Modi government will be able to get such a sensitive amendment passed in the Parliament by wrapping it in the syrup of developed India-strong India and overcome such a big challenge of public safety in the court of the public.
