Finance Minister Nirmala Sitharaman will table the Union Budget 2025 on February 1 in the Lok Sabha. With India aspiring to achieve its Viksit Bharat 2047 vision and climb to the position of the third-largest global economy, unveiling of Budget 2025 precedes many questions.
ETBFSI brought together BFSI leaders Sakshi Gupta, Principal Economist, HDFC Bank, Inderjit Camotra, MD & CEO, Unity Small Finance Bank, and Raman Aggarwal, Director, FIDC, for a pre-budget panel discussion moderated by Amol Dethe, Editor of ETBFSI & ETCFO. Here’s what they had to say:
Fiscal Prudence is non-negotiable
“I expect the government to continue on the path of fiscal consolidation and target a fiscal deficit close to or slightly below 4.5% for next year,” said Sakshi Gupta, Principal Economist, HDFC Bank.
Maintaining fiscal health is especially critical now that India has been included in global bond indices, which amplifies the importance of sustainably lowering debt levels.
“Bringing down debt levels sustainably has become a priority. It is crucial for ensuring global investor confidence, this year saw a slow start due to elections, and the momentum hasn’t picked up significantly. Next year, we might see some spillover of this year’s unspent capital expenditure,” Gupta added.
The Principal Economist at HDFC Bank Gupta also advocated for an expansion in the definition of capital expenditure. “We shouldn’t limit capital spending to infrastructure projects like roads and railways. Investments in health, education, skilling, climate resilience, and employment are equally critical for driving productivity and GDP growth,” she said.
Tax Reforms to fuel wallets and demand
To spur consumer demand, Gupta suggested targeted tax benefits, such as raising the standard deduction or increasing exemptions for health and life insurance premiums.
“There’s a need to provide tax relief for income brackets below Rs 15-20 lakh to boost disposable incomes,” she said.
Inderjit Camotra, MD & CEO of Unity Small Finance Bank also mentioned for tax reforms as one of his key budget expectations, urging simplification of individual taxes to stimulate consumption.
“Simplified taxation systems not only enhance compliance but also leave more room for consumer spending,” he said.
On employment, he urged the government to focus on labor-intensive sectors like MSMEs, climate-impact firms, and ESG initiatives. “These sectors can generate jobs in urban and semi-urban areas, significantly boosting the rural economy,” he explained. He also proposed measures like raising MGNREGA wages to Rs 375 and increasing PM-Kisan payouts to support rural incomes.
MSMEs deserve a financial lifeline
Both Inderjit Camotra, MD & CEO, Unity Small Finance Bank and Raman Aggarwal, Director, FIDC underlined the critical role of MSMEs in employment generation and rural economic growth.
Raman Aggarwal of FIDC stated for reforms to ease cash flow pressures on small businesses. “Introducing differentiated prudential norms for small borrowers and promoting leasing models for acquiring machinery and real estate can significantly alleviate MSME challenges,” he said, adding that taxation policies must support the adoption of such innovative models.
Camotra emphasised the need for policy stability to encourage long-term investments. “Stable and predictable policies will strengthen India’s ‘China Plus One’ advantage,” he explained. He also proposed group insurance schemes tailored for MSMEs to mitigate risks and support capital expenditure.
Inclusive Labour Force Participation
Labour reforms emerged as another priority for driving scalable private investments. Inderjit Camotra discussed the importance of skill development in Tier-2 and Tier-3 cities through public-private partnerships.
“Modular workforce strategies and access to skilled labor will be important for scaling private capex,” he said.
He also stressed creating infrastructure to support women in the workforce, such as creches and healthcare facilities. “Empowering women is essential for economic resilience and reducing urban migration pressures,” he added.
“By 2047, an increasing portion of our population will be above 60 years old. This will necessitate robust strategies for healthcare, pensions, and workforce engagement,” explained Sakshi Gupta, Principal Economist, HDFC Bank.
NBFCs need a direct line to funds
Raman Aggarwal, Director, FIDC discussed the importance of enhancing credit delivery to the bottom of the pyramid, particularly through NBFCs. “Diversifying funding sources for NBFCs is crucial,” he said, referencing that while bank funding has become constrained, no robust alternative mechanisms have been provided.
Aggarwal proposed establishing a direct refinance mechanism for NBFCs, akin to the National Housing Bank for housing finance companies. “Funds dedicated to MSMEs, small borrowers, and green assets like EVs and solar rooftops could be routed through SIDBI or NABARD for refinancing NBFCs,” he explained.
He also called for harmonisation of recovery and taxation norms. “For instance, NBFCs can access SARFAESI, but only for loans above Rs 20 lakh. This restriction should be removed,” Raman argued. Additionally, removing the 10% TDS on NBFC interest income could eliminate operational inefficiencies without adding revenue to the government’s coffers.
