At the CNBC-TV18 Pre-Budget 2025 Townhall, Axis Bank Chief Economist Neelkanth Misra emphasised that the government should prioritise capital expenditure (capex) over cutting income taxes to stimulate India’s economic growth.
Misra, who also serves as the Head of Global Research and a Whole Time Director of Axis Capital, stated, “There is ₹80,000 to ₹1 lakh crore of space for the government. The multiplier effect is much stronger when this revenue is spent on capital expenditure. If we consider the next year’s GDP estimate, which is around ₹360 trillion, spending an additional ₹50,000 crore on a tax cut would only be a rounding error.”
He added that small tax cuts, in the range of 5 to 15 basis points, would not significantly affect GDP growth. “When thinking about boosting GDP growth by an additional percent or so, these tweaks are not going to move the needle,” Misra explained.
On the subject of tax rates, Misra also addressed the volatility in India’s tax regime, pointing out that capital gains taxes have been a point of concern. “One of the biggest criticisms of India, when compared to countries like Vietnam, is that our tax rates are too volatile. We streamlined the taxes in July; why would we revise them again in February? Once they’ve been changed, they should remain stable to allow businesses and the economy to adjust.”
While acknowledging that some adjustments to tax slabs and thresholds could be made, Misra stressed that such changes would likely have a marginal impact, potentially releasing ₹25,000 to ₹30,000 crore. However, he maintained that at a macroeconomic level, such revisions would not drive substantial growth.
