⁠Budget 2025 Expectations-Live Updates

Reviving Public Markets Key Expectations for Budget 2025

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In recent years, India’s public markets have faced significant challenges. Regulatory actions and increased taxation have led to a sharp decline in market liquidity. For instance, the daily turnover in the currency derivatives market has plummeted from ₹40,000 crore to just ₹5,000 crore. Similarly, the equity derivatives segment has experienced a liquidity drop of 30-40%, primarily due to heightened Securities Transaction Tax (STT) rates and regulatory constraints.

Key Issues Impacting Liquidity

• Regulatory Actions: Stricter regulations have hindered trading activities.
• Increased STT: Higher transaction taxes have deterred participation in equity derivatives.
• Market Sentiment: A decline in investor confidence has contributed to reduced market activity.

Expectations from Budget 2025

• Restoration of Currency Derivatives Market

  Analysts are advocating for the reopening of the currency derivatives market as a vital step towards enhancing liquidity. This move is seen as essential not only for stabilizing current market conditions but also for positioning India favorably against other emerging markets.

• Rationalization of Securities Transaction Tax

  To boost market participation, stakeholders are urging the government to reconsider and potentially lower STT rates on futures, options, and other financial instruments. While this may initially result in reduced government revenue, it is expected that increased liquidity and participation will compensate for this loss over time.

• Focus on Economic Growth

  The budget is anticipated to prioritize economic growth through:

  1. Increased Capital Expenditure (Capex): A significant rise in government spending on infrastructure projects is expected to stimulate economic activity.

  2. Support for SMEs: Providing affordable credit and incentives for small and medium enterprises can enhance employment opportunities and drive consumption.

• Taxation Reforms

  There are also expectations regarding income tax reforms aimed at increasing disposable income. Proposals include:

  1. New Tax Slabs: Introducing an additional tax slab at 25% for income levels between ₹15 lakhs to ₹20 lakhs.

  2. Exemptions: Exempting income tax up to ₹10 lakhs could significantly enhance liquidity among middle-class individuals, thereby boosting consumption

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Income Tax Reform Expectations for Budget 2025

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As the Union Budget 2025 approaches, there is significant anticipation surrounding potential reforms in income tax slabs, particularly under the new tax regime. With rising living costs and inflation impacting disposable income, taxpayers are hopeful for adjustments that could alleviate their financial burdens.

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Current Income Tax Structure

The existing new tax regime features the following income tax slabs:

Budget 2025 Expectations Simplifying TDS Compliance on Listed NCDs

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As the Union Budget 2025 approaches, there is a growing call for the simplification of taxation compliance, particularly concerning the Tax Deducted at Source (TDS) on listed Non-Convertible Debentures (NCDs). This expectation arises amid efforts to diversify funding sources for Non-Banking Financial Companies (NBFCs) and enhance the attractiveness of these financial instruments for retail investors.

Current TDS Framework on Listed NCDs

Currently, the TDS rate on interest earned from listed NCDs is set at 10%. While this framework aims to ensure tax compliance, it inadvertently imposes a burden on end investors, particularly when these securities are traded on stock exchanges. The complexities involved in the selling and re-selling of listed NCDs can deter participation from retail investors, who may find the tax implications cumbersome.

Challenges Faced by Investors

• Tax Burden: The existing TDS structure can lead to a higher effective tax rate for individual investors compared to institutional investors.

• Compliance Complexity: Investors face challenges in navigating the TDS process, especially when dealing with multiple transactions involving listed NCDs.

Recommendations for Simplification

Industry leaders and financial experts are advocating for several reforms to simplify the TDS compliance process:

1. Streamlining TDS Procedures

The government is urged to simplify the TDS compliance process for listed NCDs by:

• Eliminating Excessive Documentation: Reducing the paperwork required for TDS filing can ease the burden on individual investors.
• Creating a Unified Compliance Framework: Establishing a straightforward process similar to that used for resident sellers could enhance clarity and efficiency.

2. Allowing Additional Interest Rates

There is also a recommendation to permit an additional interest rate on public issues of secured NCDs issued specifically to retail investors, pensioners, and senior citizens. This would create a more attractive investment environment for these demographics, encouraging broader participation in the market.

3. Enhancing Transparency

Improving transparency in how TDS is calculated and reported can help build trust among investors. Clear guidelines and accessible information regarding tax implications will empower individual investors to make informed decisions.

Implications for Retail Investors

The proposed simplifications in TDS compliance are expected to have several positive effects: Increased Participation: By reducing the complexities associated with TDS, more retail investors may be encouraged to invest in listed NCDs.

• Enhanced Liquidity: A more investor-friendly environment could lead to increased trading activity in NCDs, improving overall market liquidity.

• Fair Compensation: Allowing additional interest rates for certain investor categories ensures fair compensation and aligns with the government's goal of promoting inclusive financial growth.

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Budget 2025 Expectations Transforming India into a Global Manufacturing Powerhouse

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As India prepares for the Union Budget 2025, there is a strong emphasis on establishing the country as a global manufacturing hub. This ambition aligns with the government's broader "Make in India" initiative, which aims to enhance domestic production capabilities and integrate India into global supply chains.

Current Landscape of Indian Manufacturing

India's manufacturing sector has been growing, yet it lags behind competitors like China and Vietnam in terms of high-tech exports and overall contribution to global manufacturing output. Currently, India's share of high-technology exports stands at only 14.93%, significantly lower than Vietnam's 42.69% and China's 26.57%. To bridge this gap, the upcoming budget presents an opportunity to implement strategies that can catalyze growth in this sector.

Key Areas for Development

• High-Tech Manufacturing: The focus should extend beyond traditional sectors to include high-tech industries such as electronics, aerospace, and medical devices. This requires substantial investment in research and development (R&D) and innovation.

• Infrastructure Enhancement: Significant improvements in infrastructure are essential to support manufacturing growth. This includes addressing delays and cost overruns in infrastructure projects that can hinder operational efficiency.

Expectations from Budget 2025

1. Incentives for High-Tech Manufacturing

Experts are advocating for targeted incentives to attract foreign direct investment (FDI) in high-tech sectors. This could involve:

• 100% Automatic Route for FDI: Streamlining the approval process for foreign investments could encourage global tech companies to establish operations in India.

• Tax Deductions for R&D: A proposal for tax deductions ranging from 200% to 250% for R&D spending could stimulate innovation and competitiveness.

2. Support for Micro, Small, and Medium Enterprises (MSMEs)

MSMEs are vital to India's manufacturing ecosystem. The budget should focus on:

• Access to Capital: Enhancing financial support for MSMEs to facilitate their growth and integration into global value chains.

• Skill Development Programs: Investing in skill upgradation initiatives to ensure a workforce capable of meeting the demands of modern manufacturing.

3. Infrastructure Investment

To truly position India as a global manufacturing hub, the budget must prioritize:

• Capital Expenditure on Infrastructure Projects: Increased funding for railways, roads, and logistics facilities is crucial for improving connectivity and reducing operational costs.

• Addressing Regulatory Hurdles: Simplifying compliance processes related to infrastructure development can accelerate project completion times.

Implications for Economic Growth

The anticipated reforms in the upcoming budget could have far-reaching effects:

• Boosting Employment Opportunities: A robust manufacturing sector is expected to generate significant job opportunities, contributing to economic stability.

• Enhancing Export Capabilities: By focusing on high-tech manufacturing and improving infrastructure, India can increase its export potential, aiming for a target of $2 trillion by 2030.

• Driving Sustainable Growth: Emphasizing innovation and sustainability within the manufacturing sector can align with global trends towards environmentally friendly practices.

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Budget 2025 Expectations Easing Import Duties to Strengthen India Textile Sector

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As the Union Budget 2025 approaches, there is a pressing demand from the textile industry for the reduction of heavy import duties that are currently hampering competitiveness. The ongoing challenges faced by this sector, exacerbated by global supply chain shifts and rising raw material costs, have prompted stakeholders to call for significant reforms in the upcoming budget.

Current Challenges in the Textile Sector

The Indian textile industry is grappling with various issues, including:

• High Import Duties: The existing customs duties on raw materials and machinery make Indian textiles less competitive compared to countries like Bangladesh and Vietnam, which enjoy lower tariffs and better access to essential materials.

• Dependence on Imports: The sector relies heavily on imported machinery and specialized fabrics to maintain quality and meet international standards, yet high import duties inflate costs significantly.

• Sluggish Demand: Both global and domestic demand for textiles has been sluggish, further complicating the industry's recovery efforts.

Key Stakeholder Demands

Industry bodies such as the Apparel Export Promotion Council (AEPC) and the Confederation of Indian Textile Industry (CITI) have outlined specific demands for the budget:

• Removal of Basic Customs Duty (BCD): Stakeholders are advocating for the elimination of BCD on cotton varieties to ensure availability at competitive prices.

• Tax Incentives: There are calls for tax incentives that would enhance export capabilities, including customs duty exemptions on garment machinery imports and simplification of procedures for importing trims and embellishments.

Expectations from Budget 2025

1. Reduction of Import Duties

The textile industry is urging the government to significantly reduce or eliminate import duties on key raw materials such as cotton and man-made fibers. This change would help stabilize domestic prices and improve competitiveness against international players.

2. Support for MSMEs

There is a strong emphasis on providing support to Micro, Small, and Medium Enterprises (MSMEs) within the textile sector. Proposals include:

• Income Tax Relief: Offering tax relief to MSME manufacturing units to alleviate financial burdens.

• Access to Capital: Expanding credit facilities and guarantees to enable MSMEs to invest in growth and modernization.

3. Infrastructure Development

Investment in infrastructure is critical for enhancing logistics efficiency. The budget should prioritize:

• Logistics Subsidies: Introducing special export subsidies on logistics costs to offset increased freight charges post-pandemic.

• Skill Development Programs: Funding initiatives aimed at upskilling the workforce in the textile sector to meet evolving industry demands.

Implications for Economic Growth

The proposed reforms in import duties and support measures are expected to yield several benefits:

• Enhanced Competitiveness: Lowering import duties will allow Indian textiles to compete more effectively in global markets, potentially increasing exports.

• Job Creation: A revitalized textile sector could create millions of jobs, supporting livelihoods across the country.

• Sustainable Growth: By focusing on sustainable practices and reducing costs, India can position itself as a leader in eco- friendly textile production.

Comparison of Union Budgets 2024 and 2025

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