Finance Minister Nirmala Sitharaman on Tuesday reaffirmed that India’s economic fundamentals remain strong, countering concerns of a structural slowdown and foreign investor outflows. Speaking at the India Today–Business Today Budget Round Table 2025, she emphasised the intent behind the Budget 2025-26’s income tax relief measures, saying they are designed to reward and respect taxpayers, while giving a boost to savings and consumption.

Tax Relief Aims to Build Trust and Support Growth

As part of Budget 2025-26, the government announced zero income tax on annual income up to ₹12 lakh, a landmark decision aimed at enhancing household disposable income. The minister reiterated that the tax measures stem from a consistent policy of respecting taxpayers, highlighted earlier through faceless assessment systems and the taxpayers’ charter.

“In every Budget there is a clear sense that we respect taxpayers,” Sitharaman said. “This is also a continuing part of Prime Minister Modi’s effort to respect taxpayers.”

She further added that this tax relief will positively impact urban consumption, FMCG sales, discretionary spends, and bank deposit growth. This move comes at a time when urban demand had shown signs of moderation, and is seen as a response to revive momentum in consumer-driven sectors.

New Income Tax Act Aims for Simplicity

A new Income Tax Act is set to be introduced in Parliament shortly. The Finance Minister expressed the government’s intention to simplify compliance and modernise the tax system, while maintaining transparency and ease of use for taxpayers.

She said that although she would like the Act to be passed in the ongoing Budget session, the government would be open to sending the Bill to the Parliamentary Standing Committee on Finance first. “If the Standing Committee returns it after the second half of the Budget session starts, we will be happy to take it forward,” she added.

India’s Strong Fundamentals Dismiss Slowdown Fears

Rejecting concerns of an economic slowdown, Sitharaman asserted that India continues to grow at a healthy pace, with GDP expected to expand by 6.4% in FY25 and 6.3%–6.8% in FY26. “When your fundamentals are strong and your currency is strong… India cannot be growing fastest in the world for three consecutive years if there was a structural problem,” she said.

She acknowledged the volatility of the Indian rupee, which has crossed the ₹87 mark against the US dollar, but clarified that this weakness is not unique to India, and stems from the strengthening of the US dollar globally. She called the rupee “fit and fine”, reiterating that the economy’s core strengths remain intact.

US Tariffs: India Watching Closely, Not Speculating

Addressing the tariff increases proposed by US President Donald Trump, Sitharaman stated that India will wait and watch rather than speculate. “We can’t speculate on it. We have to wait and see what kind of action has to come,” she said.

She expressed preparedness to deal with the spillover effects of US tariff actions on China, Mexico, and Canada, which could indirectly affect India, but added there was no clarity yet on direct consequences for India.

The minister clarified that customs duty rationalisation undertaken in Budget 2025-26 was not a response to US tariff changes. “This was initiated earlier and indicated by me in 2022,” she said.

Foreign Investor Pullout: A Global Issue

Responding to questions about foreign portfolio investor (FPI) outflows, Sitharaman stressed that domestic factors are not solely to blame. She cited global macroeconomic uncertainty, policy changes in the US, and rising competitiveness from Japan and other markets.

“India’s markets and fundamentals are strong. FPIs going out is not only due to domestic issues,” she said. She added that India is taking steps to retain and attract investments, including a review of the Bilateral Investment Treaty (BIT) model.

Looking Ahead

With the introduction of the new Income Tax Act and major income tax relief already announced, Budget 2025-26 sets the stage for increased taxpayer confidence, higher savings, and robust domestic consumption.

Sitharaman’s remarks at the Budget Round Table reinforced the government’s belief in sound fiscal management, taxpayer respect, and India’s resilience in a turbulent global economy.

The continued focus on economic fundamentals, ease of doing business, and investment reforms is expected to position India as a preferred global investment destination, even amidst uncertain global developments.

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