Will Finance Minister Nirmala Sitharaman focus on capital expenditure and allocate more than Rs 11 lakh crore in the Union Budget 2025 to increase consumption? Will this step create demand and more job opportunities and boost the Indian economy?

What is CapEx?

CapEX or capital expenditure is the money spent on land, building, plant and machinery, equipment, research and development, etc that has long-term investment and can help a company grow and sustain itself.

Nirmala Sitharaman allocated Rs 11 lakh crore for capital expenditure in Union Budget 2024-25.

CapEX To Be Rs 11 Lakh Crore?

As the government is under pressure to contain the fiscal deficit to 4.5% of the GDP, Nirmala Sitharaman may not be in a position to increase the capex despite the best of her intentions.

If the Finance Minister does not increase the capex, it may be around the same figure as last year. So, Rs 11 lakh crore may be allocated as the capital expenditure in the Union Budget 2025.

The government has estimated a nominal GDP of ₹326.4 lakh crore in the FY25 budget.

Will Niramla Sitharaman Increase Tariffs?

EY India Chief Policy Advisor DK Srivastava told news agency PTI that Nirmala Sitharaman may increase tariffs on imports in a bid to counter the recent sharp depreciation of the rupee.

The Indian currency registered a steep drop in value compared to US Dollar and hit an all-time low of 86.70 on January 13.

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One of the main reasons for strengthening the greenback is the expectation of improving the US economy after Donald Trump becomes president. There is a shift in global finance and the investment is now flowing to that country.

The imposition of fresh tariffs on imports may ease demand for the US Dollar and thus reduce the pressure on Rupee.

Will Small Savings Be Hit?

The next meeting of the RBI Monetary Policy Committee is scheduled for February 5-7. The RBI is most likely to slash the repo rate, at least by 50 basis points.

The repo rate is the interest rate on which the RBI lends money to commercial banks.

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Any reduction in the bank interest rates is likely to hit the small saving schemes like the bank fixed deposit schemes, Public Provident Fund (PPF), National Savings Certificate (NSC), and Sukanya Samriddhi Yojana (SSY).

Will Sitharaman Increase Defence Allocation?

Experts believe, Nirmala Sitharaman is not likely to increase the defence allocation and she may leave it around 1.9% to 2% of the GDP.

Analysts believe the Finance Minister may also take steps to simplify the Tax Deduction at Source and reduce the tax rates to two or three slabs.

The Finance Minister is facing a serious challenge as the GDP growth rate came down to 5.4% in the July-September quarter of FY 2025-25. It was the lowest growth rate in seven quarters. Economists were shocked as Reuters has found in its survey a modest growth rate of 6.5% to 6.7%.

The Finance Minister may also be upset with the momentum of the economy getting slowed down, wages felling and the overall economic scenario getting gloomy.

Trying to water down the sluggishness of the economy, Nirmala Sitharaman has said that the lower-than-expected GDP growth of 5.4% in the second quarter was a “temporary blip”.