 "Finance Minister Nirmala Sitharaman")
A day after presenting the Union Budget for 2025-26, Finance Minister Nirmala Sitharaman spoke to Ruchika Chitravanshi, Asit Ranjan Mishra & Nivedita Mookerji on issues ranging from the theme of the Budget to income tax relief and challenging geopolitical environment. Edited excerpts:
What are the central issues you wish to address through the Budget?
The more and more we make Viksit Bharat our destination as a people’s movement, the principles of Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas have to now manifest in so many different ways. So, if you are looking at Sabka Vishwas, the government has to show we have trust of everyone. That’s what you see in the new Income Tax Bill that’s coming, and also in my statement that it will be ‘trust first and scrutiny later’. An example of that is the tax assessee himself can now declare what is his self-occupied property. We are not going to pursue the matter if he says he has two properties and both are self-occupied. Since 2019, we are gradually coming to a position that it is on the basis of trust that we want to take this forward. It’s similar in the case of Sabka Vikas. In every decision, we are now saying the Centre will have greater discussion with states, whether it’s for capital expenditure through states or to understand how state planning is going on, or sharing the PM Gati Shakti information with the private sector. So that everywhere the momentum can be with Sabka Prayas. So, what is this Viksit Bharat discussion we are doing? That is why in the beginning, a group of secretaries had gone through the whole thing for almost a year well before the 2024 elections. Their focus was on the features that we were looking at for Viksit Bharat 2047. So, I also raised seven or eight issues about what’s important for Viksit Bharat like zero poverty, at least 70 per cent of women getting into the workforce (meaning economic activity), good quality education, good quality health care… So, I listed that out. This Budget, therefore, having defined the destination in some parameters at least, highlights very clearly the strengthening of the foundation on which we are going to move forward. That’s why there’s investment in nutrition, education, digitalised manuscripts in India and learning material for students, centres for artificial intelligence, and labour-intensive sectors, so that our demographic dividend gets the benefit and contributes to nation-building…. So, it is a Budget in which we are strengthening our (the nation's) foundation. It’s a Budget that’s taking us towards the destination of Viksit Bharat. It is a Budget that recognises the contribution of democracy, and the demographic dividend, making sure that people are given due recognition. You find all these aspects woven in. And, of course, there’s repeated mention of garib (poor), annadata (farmer), yuva (youth), and nari (women) in every scheme.
How difficult was Budget-making for you against the backdrop of so many geopolitical challenges around the world, including the new leadership in the US and the threat of imposition of tariffs? Has the Budget done enough to address these issues?
It is addressed as much as we know what the difficulties are, or at least they are indicative. About what is not yet pronounced, I can’t take any measure. Some people are asking me if I am prepared to take a decision based on the steps that the US administration may take. I don’t know yet because the US steps are not known yet. So, I can’t really say that I have done this or I have not done this. What I have done at this moment is to make sure that India is ready for ‘Make In India’, and ‘Make In India for The World’. India is ready for its agriculture to be modernised, agriculture to have greater productivity, and that’s why you find the PM Dhan Dhaanya Krishi Yojana… The Budget has proposed that the scheme will cover 100 districts with low productivity and moderate crop intensity to ensure they have high-yielding seeds and better irrigation, better agriculture-related investment or value-add of their products, among other things. These are the things we are building into the system.
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So, in a way, this Budget addresses issues of sectors that have to be given strength… It was challenging no doubt. It was challenging also to have committed ourselves to meeting the fiscal deficit as per the glide path. And also since the last Budget in July, we had an indication that after 2026 we would focus on debt to GDP. We have given ourselves enough challenges to meet, especially when the global situation is so volatile. It has been an interesting challenge.
The US administration has announced tariffs on Canada, Mexico, and China. Do you see that as an opportunity for India to export more to America, or do you see it as a threat?
The opportunity to export to any country, including the US, is constantly used. Export promotion is the biggest point in our Budget this year… We are looking at every opportunity that is available.
What is the progress on the economic policy framework promised in the July Budget?
We will have something happening soon on that. I didn’t mention it in the Budget because it’s a work in progress.
What’s the government’s stand on strategic disinvestment? Will the government touch upon it in the near future?
We have been doing it. You may say it’s not as much as we would have expected. But strategic disinvestment keeps happening. Also, on disinvestment, there’s no change in our position. We have the Cabinet-approved decisions and we will take it forward.
On Customs rate rationalisation, you have cut seven slabs this time, last time you had cut eight. So, there are eight left now. Do you think after all this rationalisation, Indian economy is more open to the world? Is this exercise a work in progress?
I think substantial reduction has happened. And we have actually opened ourselves up. Where we have retained the rates are also because there are some sectors where Indian capacity is growing. It is only there that we have tried to retain the duties. Otherwise we have opened up or relaxed considerably. The cess has not gone up. We have completely removed the social welfare cess. That should also be noticed.
This is being seen as a consumption Budget. Do you agree and was that the objective?
You must be talking about the income tax exemption for up to Rs 12 lakh of annual income. No, the objective was not to have a consumption Budget. The main objective was to honour the taxpayer who have been paying taxes without any hesitation and on time. Since 2019, after having issued the taxpayer’s charter, we have been issuing certificates to prompt and regular taxpayers. Our attempt to honour the taxpayer has been since 2014 and more actively since 2019-20 onwards. In that process, this time the Prime Minister decided that we need to recognise the taxpayer and their contributions. That’s where this came up from. Yes, it will lead to consumption, that’s a matter of fact.
What is the rationale behind putting Rs 12 lakh rebate figure? There's this view that taxable income in any developing country is almost twice or thrice the per capita income for that country. Now with Rs 12 lakh, India has become a bit of an outlier, where it is almost five times the per capita income.
First of all, if you're pointing out that India is an outlier in doing this, India is also an outlier in the fact that of the 1.4 billion population, 80 million are taxpayers. If I have to constantly work on only logical ways in which other countries have handled (taxation), I will never be in a position to give any relief to any taxpayer.
Does that justify that 80 million people who are in the tax net today are the only ones who will have to bear the burden of the growing demand for revenue? My revenue requirements will have to grow. But does that mean that I shouldn't pay attention to widening the net? And does that mean that I'll have to keep everyone (in tax net) despite the fact that the living standards are different today, cost of money is different today. Inflation is persistent, probably because of imported inflation.
Has there been a change in approach in the Budget from more capital expenditure to more money in the hands of the people?
No, there’s no change in approach. As I have been saying since 2019, we have been honouring the taxpayer. I’ve even listed the things that we’ve done. Take Vivad Se Vishwas, where “faceless assessment” has been brought in. “Faceless” is there in appeal too. For every consultation that we do on goods and services tax (GST) or direct taxes, we talk to people. Our continuous attempt is to recognise taxpayers, and clearly tell them about their contribution. It has been going on. And, therefore, this time, we’ve also done this.
Perhaps the question is being raised because there’s the thinking that the government is shifting from supply-side economics to demand-side economics by giving more money in the hands of the people through a tax cut. Do you agree?
This may be a consequence. But my objective is to make sure that the voice of the people is heard and recognise them for their contribution ... Capital investment has not come down. It has gone up from the Revised Estimates. How can we say that there’s been a shift from capital expenditure?
Money going to states has increased this year over last year. What is the thinking behind this?
If it is inclusive of the grants in aid, it will be. And what is coming out of the Finance Commission’s recommendations, we will continue to do. Grants-in-aid would have tapered off as we are near the end of the financial year. Other than that, 50-year interest-free loans for capital expenditure have maintained their level — Rs 1.25 lakh crore (trillion) to Rs 1.5 lakh crore (trillion). That has an incentive-led segment within it. When states undertake reforms, we give incentives for them. That is one way of nudging them to do reforms, such as giving smart meters.
Do you think the Budget addresses the issues of slowdown in private investment directly?
The fact is that the government has repeated its commitment to public expenditure and is making sure that it invests every borrowing that is done. If 4.3 is capital expenditure to GDP, and the projection for the fiscal deficit is 4.4 per cent for the coming year and 4.8 per cent this year, literally what we borrow is going towards capital expenditure. We are conscious of the way in which our borrowing is going to create assets. Our borrowing is not for servicing the existing debt. It is not to repay the principal. Our borrowing is clearly going towards asset creation. Therefore, in the light of this, in the context we have set from 2026, we will state the debt to GDP and take it close to 50 per cent. Our intention of keeping fiscal prudence on top of the agenda without cutting on any expenditure is something I’ll be happy about. That’s one of the biggest strengths of Prime Minister Narendra Modi’s administration. He has been fiscally conscious: Spend, but create assets, spend but make sure that people benefit from it. This has been a beautiful guiding principle. And I think as a finance Minister I owe so much to the Prime Minister for keeping this path clear before us. With this clear in his mind, he is able to provide this relief to taxpayers.
You have spoken about the reform agenda in the Budget. A committee will be set up for that …
The reform agenda continues in those six specified areas, without any hesitation. But it is on the score of regulators in different areas — say for the non-financial sectors, a lot of things are happening on inspection, certification, quality standards, etc. Industry is also seeing if there can be simplicity and cohesion. And among them if the departments or the regulators talk to each other, there will be a lot more ease of doing business … There’s no decision yet on who will head the committee or its composition ... The high-level committee will talk to the people, the stakeholders, before taking any decisions.
You mentioned that under the Financial Stability and Development Council (FSDC), you will evaluate the impact of financial regulations.
That is why we separately spoke about it in a different paragraph — the financial and the non-financial sectors. For the financial, it will go through the FSDC. And in the FSDC, first of all, among regulators there has to be a lot of conversation. And into this, some of the stakeholders’ inputs will be taken up. In what format it will be taken up is something we’ll have to decide. And our intention is to ease any kind of pain points that may exist for the stakeholders.
The new Income Tax Bill is expected in a week. Will there be any surprises?
Well, I would like to believe it is one of those big-ticket reforms. Since 1965, there has not been any kind of review or update of the Income Tax Act. If anything, more and more additions have happened. And additions are required. But additions have happened in varying times.
What was the context of India in 1965 and what was the context of India subsequently? Take two milestone years — 1975 and 1991 — but in each one of those, and I’m sure not every year, but at least in some way or the other, additions have happened to the Income Tax Act. The letter and spirit of the original Act, and the subsequent additions, has all made it so bulky that it is such a user-unfriendly document. So the intent, as I said in the July Budget, is to completely simplify its language. It will have the same letter and spirit guiding it in its fullness. And if there is any part which is loose or which has to be tightened up, we will do it so that it doesn’t lead to any interpretation-related issues. Because sometimes people approach the court, they pick up an issue and then give an interpretation. But some other court somewhere else gives a different interpretation. I wouldn’t fault the courts. If the language of the Act is yielding to such ambiguities, we’ll have to correct it as well ... We will put it in Parliament, introduce it, and then send it to the Standing Committee.
Is privatisation on the back-burner? What about privatising some banks?
Not at all on the back-burner. Everything that has been listed will happen. We will have to see when the opportune moment is, both from the market perspective and the readiness of the organisation. In the sense that many parameters will have to be fulfilled before they go for an initial public offering or get listed, release the tender. If there are only one or two tenders we will have to reconsider. We need multiple tenders. There are so many considerations. But we will be going on with it.
Do you think corporate tax collection should go up?
I expect it to go up. There are clear citations reaching me that passive investment is happening. They’re earning over their interest rather than investing.
The Economic Survey had a lot to say on artificial intelligence. What is the government’s thinking on this?
We are looking at artificial intelligence for agriculture, urban development, and health. Now, also for education. Centres of excellence for each one of them are being set up. So we are going with a discerning, clear agenda of getting artificial intelligence to work for the benefit of these particular sectors ... It will have an impact as industries are moving towards robotics and web 3-driven manufacturing formulations. Business models are now revolving around it.
You had mentioned the internship scheme in the last Budget. How is it going to improve?
Many companies have come forward -- even more than in the first phase. Many of them have given extra benefits. Some are providing lunch, some accommodation, and some transportation. Interest among graduates, other than higher secondary, is increasing. We find people have understood the schemes now and therefore they are coming in. Some companies are putting in their own money. The second phase has started.
You had said banks should reduce interest rates. So have you put the ball back now in the central bank’s court?
No, I didn’t say “reduce rates”. I clearly said credit should be affordable and available. I’ve not talked about who’s got to reduce rates ... It’s for you all to say whether there’s scope (for monetary policy to reduce the rate).
On Chinese foreign direct investment (FDI), is there a change in stance since our import dependence on China is rising?
No, but there are companies that are requesting technical experts who need to come. There are capacities that need to expand, and they say their partners in China would like to come. But there’s nothing before me. The industry is asking.
The Budget was on a Saturday. The market was open. Are you disappointed with the tepid response of the market?
No one particular aspect plays completely on the mind of the market — international and domestic — many
other factors do. I will wait and watch how they move based on the developments globally also.
Between corporate tax reform and income tax reform, which is the bigger reform?
That was important at the time. This is important now. But this is part of the sequence of things that we are doing for the tax system. Since this is a lot more democratised, it touches every citizen. Companies — some are large, some are medium-sized, and so on. But across the board, taxpayers are benefiting because the rates are coming down.
What is the thought behind revising the model Bilateral Investment Treaty?
It’s meant to make it more investor-friendly. We have been holding onto it since 2016, and the world has drastically changed since then. I will have to do a comprehensive study and make it more investor-friendly, of course, while keeping our sovereign rights intact.
After announcing 100 per cent FDI in insurance, what are the next frontiers for opening up FDI?
I think now all have come under the automatic route, except for certain sectors where government approval is required.
Now, is your next challenge to deal with goods and services tax rate simplification?
Yes, ministers are working on it. I’ll have to sit with them to understand how best we can take it forward. That work is ongoing. I will join them.
In our last Budget conversation, you talked about over-financialisation. As markets are rising more, that concern is also increasing. How do you see the situation?
In a growing economy like India, with a growing market, and in a country where more companies are conducting their governance in a more transparent manner, with clean and clearly visible corporate governance, it will attract money. And at this stage, for me to be worried about over-financialisation —no. I respect the Economic Survey for saying what it has, but I’m also conscious that people are wiser in deciding where the returns are better.
Yes, of course, we’ll have to keep them constantly informed about the risks that may play out in one way or another. I’m not saying this is safer or that is safer, but the information flow should be so good that they make a conscious decision, understanding there may be an element of risk, but they can play there, go there, or invest there. So, I would pause before pressing any alarm bells about financialisation. The Indian economy is showing a lot more of its capabilities.
If governance-related information is coming through corporate governance requirements, why should the Indian investing or saving public be denied an option available to them?
They haven’t done badly by entering the market. They’ve seen which companies are doing well, and they make a conscious choice.
What was the message that you were sending out with your choice of sari on Budget day?
I owed it to her, to Dulari Devi (a Madhubani artist). She gave it to me when I went there (to her village) as a gift. Normally, I don’t take gifts. I called up my staff, and I said, we need to pay for this. And her voice sort of dipped. She said that in Mithilanchal, when girls come, there's a practice of godh-bharai where kumkum, rice, haldi, and a vastra are given. There are no payments accepted for it. Then she came close to me and said, ‘wear it on the Budget’.
