Union Budget of India 2025: Some Thoughts

In his literary masterpiece and an incisive economic portrayal of interwar England "The Road to Wigan Pier" written in 1936 , Orwell described the pitiful conditions of the English working class during the interwar years. The squalor, deprivation, and despondency of Wigan’s laborers exposed an economic system that functioned on exploitation and indifference. Orwell wrote, "The essential fact about a capitalist society is the inequality of income," a reality that remains unchanged in many economies today, including India’s. The government’s interventions at the time of Orwell were mere palliatives—offering short-term relief but never addressing structural inequalities. As Orwell put it, "The lower-class people exist, as it were, somewhere below the surface of the earth." Sounds familiar, even in the twenty first century.

This piece is not an exhaustive analysis of the Budget but rather a bunch of thoughts. As India marches ahead with its economic ambitions, the Union Budget of 2025 presents a vision centered on tax rationalization, industrial growth, and digital expansion. It is a budget that caters to growth, yet questions remain whether it caters to justice. Indian Finance Minister Nirmala Sitharaman, in her speech, stated, "This Budget aims to provide relief to taxpayers while ensuring inclusive development. We are laying down the foundation for India’s Amrit Kaal, where opportunities reach every section of society." The Budget, at surface level, is full of promises, which hopefully will be followed up by action on the ground.

Most notably, the Union government has increased the income tax exemption limit, bringing relief to middle class salaried professionals and small businesses. This makes the direct taxes much more progressive, as it ought to be. There is a reduction in corporate tax for MSMEs, aiming to stimulate employment and entrepreneurship. A significant allocation has been made for highways, ports, and rural infrastructure, while investment in AI-driven governance and digitization of public services is another focal point. Increased allocation to primary healthcare and a push towards universal health coverage seeks to address social sector needs, with a renewed focus on vocational training and AI-based education programs. But does this budget address the fundamental divide of the rich and the poor?

Despite ambitious claims, India continues to grapple with severe economic disparities. According to the World Inequality Report 2024, the top 10% of India’s population holds nearly 65% of the nation’s wealth, while the bottom 50% own only 5%. Unemployment remains a persistent issue, with the latest Periodic Labour Force Survey (PLFS) estimating India’s urban unemployment rate at 8.2% in 2024. Rural distress is even more pronounced, as agricultural wages have stagnated, and job opportunities outside agriculture remain scarce. That has led to migration of labour into cities and towns, putting huge stress on urban planning.

Moreover, social sector spending in India remains abysmally low. Public expenditure on healthcare stands at merely 2.1% of GDP, significantly lower than the global average of 6%. Similarly, government spending on education has remained stagnant at around 3% of GDP, well below the recommended 6% as per the National Education Policy. Recent comparisons with China, post Deepseek, has shown how much China is ahead of India in higher education spending and R&D expenditure.

In The Road to Wigan Pier, Orwell illustrated the stark contrast between the privileged classes and the laborers who toiled in coal mines, struggling to survive in appalling conditions. India’s modern equivalent is found in the disparity between its urban elite and urban slum dwellers and in the urban-rural divide. Wage disparities continue to widen, with urban centers benefiting from IT and financial growth while rural India struggles with stagnation. Elite institutions and private hospitals cater to a small percentage of the population while millions remain undereducated and lack access to proper medical care. Infrastructure developments are predominantly city-centric, with rural regions still grappling with inadequate roads, electricity, and employment opportunities.

A critique in The Hindu noted, "The Budget’s emphasis on digital infrastructure and tax cuts misses the elephant in the room—rural distress. The government’s continued focus on urban development without a robust rural employment program risks deepening economic inequalities." Similarly, an editorial in The Indian Express stated, "While the government touts fiscal consolidation, the absence of substantial social sector spending raises concerns about long-term economic justice." To be fair, one budget cannot be seen as a panacea for India’s economic woes. There’s Niti Ayog ( the erstwhile planning commission ) for that. Neither can this Budget be seen as a pivotal moment in India’s economic history, as the Indian media has gone agog post Finance Minister’s speech.

In this context, Orwell’s observations from the 1930s remain strikingly relevant. Economic policies, if merely aimed at easing tax burdens or boosting select industries, fail to address the core issue—social inequality. India’s budget for 2025, despite its merits, follows a trajectory that prioritizes growth over equity. India grew at a significant pace over the last two decades, but the fruits of the growth got distributed unevenly. In the initial stages of Indian economic reform, it was expected that social welfare policies would take care of the problem of inequality,. It clearly hasn’t. Absolute poverty numbers do not indicate the extent of impoverishment of the bottom half of the Indian population. The Chart from World Inequality Database shows how the bottom half of India's population fell behind and how the growth dividend has gone to the top 1% ( and top 10%) of the population.

If India is to solve its own Wigan Pier, it must go beyond short-term economic fixes and embrace policies that ensure equitable development. Redistribution, investment in rural economies, and structural labor reforms must become central to the budgetary and longer term policy conversation. With a growing young population, Indian economy can reap enormous economic dividend if productive economic opportunities could be created not just for a few but for the huge chunk at the bottom of Indian economic pyramid. Right now, whatever the Government rhetoric, the reality on the ground is grim. Millions are unemployed and underemployed in Indian families, which must be the topmost policy concern. The pursuit of “ trickle down” growth theory has resulted in "siphoning up" of the growth dividend. The unemployed youth are now staring at a future where they don’t know what to look for.

As Orwell observed , there is a human dimension to the unemployment issues.

He writes “When I first saw unemployed men at close quarters, the thing that horrified and amazed me was to find that many of them were ashamed of being unemployed. But at that time nobody cared to admit that unemployment was inevitable, because this meant admitting that it would probably continue. The middle classes were still talking about 'lazy idle loafers on the dole' and saying that 'these men could all find work if they wanted to', …when I first mingled with tramps and beggars, to ,find that a fair proportion, perhaps a quarter, of these beings whom I had been taught to regard as cynical parasites, were decent young miners and cotton-workers gazing at their destiny with the same sort of dumb amazement as an animal in a trap. They simply could not understand what was happening to them. They had been brought up to work, and behold! it seemed as if they were never going to have the chance of working again. In their circumstances it was inevitable, at first, that they should be haunted by a feeling of personal degradation. That was the attitude towards unemployment in those days: it was a disaster which happened to you as an individual and for which you were to blame.”

The budget in an attempt to course correct to boost consumption and thereby economic activity. This should be supplemented by a focused attention to unemployment and distributional concerns.

References:

1. The Hindu, Editorial, "A Budget for the Few?", February 2025. Link

2. The Indian Express, "Tax Cuts Over Justice?", February 2025. Link

3. Business Standard, "Union Budget 2025: A Pragmatic Approach or an Elitist One?", February 2025. Link

4. World Inequality Report 2024. Link

5. Periodic Labour Force Survey (PLFS) 2024. Link

6. Orwell, George. The Road to Wigan Pier. 1937.