Debt Reduction is Priority, But Govt Programmes to Continue Strongly: FM Sitharaman

Finance Minister Nirmala Sitharaman emphasised that the higher capital expenditure (capex) target is a testament to the government's efforts at asset building, during a post-budget interaction with industry stakeholders in Mumbai today. She also informed that the capex target for this fiscal year is 10.2% higher than the previous year.

Sitharaman's statement came amid industry concerns about a tepid capex as the government is focused on bringing a consumption boost and keeping a check on the deficit numbers.

"For the year ahead, the govt is aiming to facilitate consumption more, which is evident in the tax relief measures in Budget 2025, but that does not mean that the capex focus would decrease," she added.

The Finance Minister further added that moving forward the government's emphasis is on pruning the debt-to-GDP. Every measure will be directed towards taking down the debt but it is not going to hamper any of the government programmes, she noted.

Sitharaman further stressed that some of the upcoming programmes will be as much of a power-guzzler as a job-generator.

Furthermore, she pointed out that the government is looking at measures to FDI limits in the insurance sector.

Government Doubles Down on Consumption

A slowdown in consumption is dragging India's economic growth, which is projected to grow at a four-year low of 6.4% during FY25. Recently, the government has extended tax exemption limit from Rs 7 lakh to Rs 12 lakh, to boost consumption.

Earlier, during an interview with Outlook Business, Revenue Secretary Tuhin Kanta Pandey said that the government believes in giving money back to taxpayers, addressing the perception of excessive taxation. The idea is for people to spend, save, and invest, which in turn stimulates the economy, he added.

He also emphasised that the corporate sector should also participate in demand creation by giving more money to their employees or hiring more. "If you are raising productivity, then wages must also reflect that growth. You can’t say I will increase productivity but I will not increase the wages," he noted.

In 2019, tax benefits were also provided to the corporate sector in the expectation that companies would pass on the gains to their employees.