Why 2025 Budget is a “Make or Break” moment for India

India is taking a significant turn as it prepares for the Union budget in 2025. The country’s economic scenario includes high taxes, populist politics, and a government that often prioritizes choice success over meaningful governance. These factors raise an important question: Will the budget in 2025 put India on the road to long-term economic development, or will it elaborate on the existing challenges?

Citizens have set high expectations over this budget especially working class and small to medium size business owners as they are the ones who get scrutinised the most due to high taxation and indirect taxation like GST ( goods and service tax). As the Fast-growing economy tends to slow its growth from 8.4 % to 6.3% India’s aspiration to become develop the economy by 2047 seems a difficult task to achieve. to mark this milestone India needs at least Two decades of growth around 8% to 9% only then it will be able to take millions of people out of poverty. And for growth like that it needs Business, innovation, More salary and financial power in the hands of the working class and a political system that aims at the economic growth of the country.  Let’s dive deep into why India needs reform in its current system 

High taxes and their influence on business and the economy

India’s complex and high tax structure has created significant obstacles for companies. The goods and services tax (GST) was introduced to simplify taxation, but its implementation has been simple. Small and medium-sized businesses (SMBs), which make up the spine of India’s economy, are especially affected by high compliance costs and heavy tax pressure. These factors prevent development, innovation, and competition.

In addition, high corporate taxes and frequent regulatory changes prevent foreign direct investments (FDI). Companies prefer to work in countries with stable, business-friendly policies, and India loses the risk as an investment centre if tax reforms are not introduced. coupled with high taxation it is also very complex  Corporate taxes are around 25 per cent for local companies and 40 per cent for foreign companies which might be reduced to 35 per cent by this financial year.  

Personal income tax rates in India are high, yet only 2.2% of the population pays income tax. Due to these high rates and the complexity of the tax system, many Indians opt to work in the unorganized sector to avoid the burden of formal taxation. Source  (Tavaria, 2024) This is also a reason many citizens evade income tax in the country 

Apart from all this, thinking about the Return on their taxes further demotivates people to not pay taxes. An average taxpayer does not get anything in return, as there is no free medical care, free schooling, or even infrastructure. Corruption and pollution in the country make earning-class people think twice about not paying taxes. Problems like a lack of infrastructure or bad infrastructure make businessmen leave the country with all their wealth, which causes a downward economic spiral.

Freebies and populist politics: a fiscal burden

To win the election, political parties across the spectrum have to offer “free” power, water, and other welfare schemes. While these schemes provide short-term relief for some parts of society, they also cost the economy a great deal. The funds used on these programs reduce the government’s ability to invest in important sectors such as infrastructure, health care, and education

Freebies culture has been appeased by all politicians recently over the launch scheme called ‘ladli-behna-yojana (Finserv, 2024) in which the government will give 1000 rupees permonth to women and there are many schemes like this politician casually saying “If I win I will 10,000, 20,000 permonth to there vote bank” and to give all this money they raise tax do corruption and at the end, inflation becomes out of control as government do not cut unnecessary spending on this freebee un-productive scheme which is devasting to industry and economy as a resource will be not directed toward producing more jobs, reduce taxation and improve infrastructure.

This short-term approach has created an addiction culture, where citizens expect free services instead of demanding employment opportunities and industrial development. Countries such as China have taken a different view, focusing on long-term investment in large industries that promote permanent growth. India should consider its fiscal strategy to ensure that resources are aimed at development instead of making choices.

The Obsession with Elections Over Governance

An important challenge before India is strongly focused on winning elections rather than effective governance. Many policies are designed with an eye on electoral benefits instead of addressing deep-rooted -economic questions. It has persistent political changes, a lack of responsibility and reluctance to make the necessary financial decisions.

For example, instead of improving the working law to attract production investments, the authorities often prefer short-term measures that appeal to voters but do not contribute to India’s long-term economic stability. India’s progress will be limited without focusing on electoral-centered policy to management strategies.

India needs to get out of the culture of winning elections, giving promises and executing completely opposite things. In the short bureaucratic system of the country needs to become Result-oriented rather than process-oriented.  

A Lesson from China: Investing in Key Industries

China’s economic rise offers valuable lessons for India. While India has focused on social welfare schemes, China has aggressively invested in infrastructure, manufacturing, and technology. The result is a booming economy that competes globally, while India continues to struggle with employment generation and industrial stagnation.

If India wants to position itself as a global economic powerhouse, it must prioritize investments in critical industries. This includes boosting manufacturing, strengthening defence and aerospace sectors, and creating a business-friendly environment that encourages both domestic and international investments.

The Economic Consequences of Current Policies

The combination of high taxes and populist spending has slowed economic growth. Businesses are either struggling to survive or choosing to relocate to tax-friendly regions. Without urgent policy interventions, India could see capital flight, fewer job opportunities, and stagnation in key sectors.

Moreover, the rising fiscal deficit caused by uncontrolled spending on freebies limits the government’s ability to invest in long-term development projects. This results in inadequate infrastructure, poor public services, and limited economic expansion.

Long-Term Solutions for a Stronger Economy

To ensure sustainable growth, India must adopt a long-term economic vision. Some key strategies include:

• Tax Reforms: Simplifying and reducing tax rates to encourage business growth and investment.
• Investment in Infrastructure: Prioritizing roads, railways, and digital connectivity to enhance productivity.
• Focus on Innovation: Encouraging research and development to make India a global leader in technology and manufacturing.
• Reducing Populist Spending: Redirecting funds from election-driven freebies to long-term developmental projects.
• All of the above can only happen if the governance system in India changes It is clear that the current system in India is pushing politicians to give freebies and other appeasement to and win an election So that politicians remain accountable and are awarded on delivering the results on things they promise.

Conclusion 

The 2025 Union Budget represents a defining moment for India’s economic future. If policymakers continue with high taxation, populist giveaways, and election-focused governance, the country risks stagnation. However, if reforms are introduced to promote business growth, industrial investment, and long-term economic policies, India has the potential to emerge as a global economic powerhouse. The choice is clear India must prioritize sustainable growth over short-term political gains.