A vendor blows soap bubbles at a market in New Delhi, India, January 31, 2025. For representational purposes.
Credit: Reuters Photo
The 2025 Union Budget was expected to bring much-needed relief and progressive measures for India’s middle class, which has long been grappling with inflation, stagnating wages, and an uncertain future. The anticipation was heightened by the mention of the middle class, repeatedly, in the President’s address to Parliament on January 31, and the Prime Minister’s remark invoking Goddess Lakshmi’s blessings for the well-being of the middle class. However, the reality of this Budget has left the middle class firmly stuck in the middle, with little to no substantial relief.
Inflation has been a persistent challenge for the middle class, eroding purchasing power and increasing the cost of essentials. Additionally, the unemployment rate remains a significant concern, with few new jobs emerging across India.
The expectation was that the Budget would spur corporate India into increasing private capital expenditure, which in turn would generate jobs, particularly in manufacturing and services — the two sectors that drive employment. Yet, the Budget fails to provide any clear incentives to attract substantial corporate investment.
Manufacturing, which holds immense potential for job creation, has failed to scale up globally as expected, with India’s productivity still lagging countries like Vietnam and Taiwan. Until India addresses its productivity challenges, manufacturing’s potential as a major employment generator remains uncertain.
Another hope for the middle class was a reduction in food inflation, which has deeply affected household budgets. To tackle this, the government needs to focus on building climate resilience in agriculture, improving farm productivity, and developing climate-resilient crop patterns tailored to India’s diverse climatic conditions. Unfortunately, no concrete steps were outlined in this Budget to address these urgent concerns.
For many senior citizens, income from fixed deposits has been a reliable source of financial stability. A reduction in taxation on fixed deposit interest earnings would have been a welcome relief, but once again, this was not addressed in the Budget. The Budget did bring a smile to individual income taxpayers by increasing the nil income tax threshold from Rs 7 lakh to Rs 12 lakh.
With the rising cost of living, there was a genuine expectation for more deeper tax cuts, and an increase in the standard deduction that would have put more money back into their pockets. Instead, the Budget offered only minor adjustments.
Housing remains one of the largest expenses for middle-class families, and the dream of homeownership continues to feel out of reach for many. The lack of policies to support social rental housing or reduce the financial burden of home loans is disappointing, especially considering the increasing urbanisation and demand for housing. Equally, there was a hope for increased investment in public services — healthcare, education, and infrastructure — that directly affect the quality of life for the middle class.
The 2024 Union Budget promised the introduction of climate taxonomy, which is essential for financing climate-related projects. A year later, there is still no sign of progress on this front. Climate taxonomy is crucial not only for domestic financing but also for attracting global capital for climate adaptation and mitigation efforts. The delay in this vital policy only exacerbates the middle class’ growing frustration, as they continue to bear the brunt of climate-related price hikes.
The middle class, which forms the backbone of India’s economy, finds itself once again overlooked in a Budget that seems more focused on other sectors than on alleviating the everyday concerns of citizens. This Budget, more than any other, underscores the widening gap between the promises made to the middle class and the tangible outcomes they have seen in their everyday lives.
Srinath Sridharan is a corporate advisor and independent director on corporate boards. X: @ssmumbai.
Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.