MUMBAI: India's Budget 2025, presented by Finance Minister Nirmala Sitharaman, has positioned the country for significant advancements across various sectors, particularly aiming to transform India’s maritime capabilities and stimulate economic growth through tax reforms.
To develop the maritime sector, Sitharaman announced the establishment of a Rs 25,000 crore Maritime Development Fund (MDF), to offer competitive support for shipbuilding and related industries. This fund is expected to attract up to 49% government contributions, supplemented by support from state-owned ports and private investors.
“For long term financing of the maritime industry, the Maritime Development Fund will be established,” Sitharaman stated during her speech to Parliament. She emphasized restructuring financial assistance for shipbuilding to boost domestic manufacturing and create jobs.
The budget also introduced measures including extending the exemption from Basic Customs Duty (BCD) on raw materials and components used for shipbuilding for another decade, effective from April 1, 2025. Dr. Ranjan Varghese, CEO of Steel Ships, noted, “This is a step in the right direction,” highlighting the timing of this support against the backdrop of increasing global demand for modern, environmentally compliant vessels.
The measures will enable India, which holds less than 1% of the global shipbuilding market and ranks 20th, to aim for entry among the top 10 shipbuilding nations by 2030 and the top 5 by 2047.
Sitharaman announced changes to the tonnage tax scheme, which will now include inland vessels to encourage water transport. “This move is significant for promoting sustainable transport solutions within the country,” she said.
Further, the proposed ship recycling credit note scheme promises fleet owners up to 40% of the scrap value of ships dismantled domestically, redeemable against the cost of new vessels built in India. An official explained, “The goal is to attract foreign fleet owners to recycle ships here and encourage them to place orders with local shipbuilders.”
Meanwhile, the budget featured broad personal tax reforms aimed at boosting household incomes. Tax rates were slashed, eliminating taxes for individuals earning up to 1.28 million Indian rupees (approximately $14,800) per year, up from the previous threshold of 700,000 rupees. “This structure will reduce taxes on the middle class and leave more money for consumption, savings, and investment,” Sitharaman noted.
This change is expected to generate approximately Rs 1 trillion ($11.6 billion) less revenue for the government annually, aiming to stimulate consumer demand amid rising inflation and economic tensions globally.
The finance minister’s fiscal strategy aims for capital spending to increase by 11% to 11.21 trillion rupees from the previous 10.18 trillion rupees, albeit falling short of investor expectations.
Farmers will also see benefits, with the government raising the ceiling for subsidized credit from 300,000 to 500,000 rupees. Sitharaman disclosed plans for launching nationwide missions emphasizing technology adoption for high-yielding crop production.
Sitharaman stated, “We need to boost both manufacturing and export levels, which currently account for about 17% of GDP, with long-term strategies to reach our goal of 25% share.” She announced increasing the foreign direct investment cap on insurance to 100% from the current 74%, representing another step toward enhancing economic resilience.
Experts have reacted positively to tax reforms, viewing them as likely to spur consumer demand and savings among the struggling middle class, which now finds itself dealing with increased living costs. “The new tax structure should invigorate sectors directly tied to consumer spending,” remarked Sakshi Gupta, HDFC Bank economist.
Stocks related to consumer goods rallied following the announcements, with companies like Maruti Suzuki and Godrej Consumer Products witnessing increases of 4% to 8% as investors grew optimistic about the possible stimulus.
Dissatisfaction lingers, nonetheless, with analysts expressing concerns over capital expenditure plans. Industry giants such as Larsen & Toubro experienced stock dips of 1% to 6%, demonstrating investor anxiety about the budget's infrastructure spending increments.
Despite potential global economic headwinds, including uncertainty over trade conditions with the U.S., the government spotlighted the importance of sustaining economic momentum through domestic initiatives and boosting growth across agriculture, manufacturing, and the financial sectors.
Overall, the 2025 budget reflects India’s aspirations to not only bolster its maritime industry but also support broader economic progress through calculated tax reforms and spending initiatives.