Understanding India's 2025 Budget with ChatGPT
Using ChatGPT to understand something I always avoided to even look at. With these LLMs, I can expand what I want to understand.
I’ve never really paid attention to the Indian budget. First, I don’t understand financial jargon. Second, there’s nothing I can do about it—it applies to everyone, and I’m not a financial planner. I leave all of that to my CA, who takes care of everything.
But this year, I had a weird idea. Since I’ve been using LLMs like ChatGPT, I thought, why not ask an AI to help me understand what’s happening with the Indian budget?
So, I asked ChatGPT:
What do you know about the Indian Budget 2025?
It went online, searched everything, and provided me with a short summary. More importantly, it categorized the information neatly, saving me the hassle of going through multiple sources.
The Union Budget for the fiscal year 2025-2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduces several key measures aimed at stimulating economic growth and supporting various sectors:
Income Tax Reforms:
- Increased Tax Exemption Threshold: The budget raises the income tax exemption limit to ₹1.2 million annually, effectively making income up to this amount tax-free. Adjusted tax brackets also benefit individuals earning up to ₹2.4 million. (ft.com)
- Tax Cuts for the Middle Class: These adjustments are designed to boost household savings and consumption, providing significant relief to the salaried middle class. (pib.gov.in)
Agricultural Initiatives: - Prime Minister Dhan-Dhaanya Krishi Yojana: This program targets 100 districts with low agricultural productivity, aiming to benefit approximately 17 million farmers. (pib.gov.in)
- Enhanced Credit Access: The government plans to facilitate short-term loans of up to ₹500,000 for 77 million farmers, fishermen, and dairy farmers through the Kisan Credit Card (KCC) scheme. (pib.gov.in)
Investment in Research and Development: - Private Sector-Driven R&D Initiative: An allocation of ₹200 billion has been made to implement a private sector-driven research, development, and innovation initiative. (pib.gov.in)
- PM Research Fellowship: The budget introduces ten thousand fellowships for technological research in IITs and IISc to foster innovation and technological advancement. (pib.gov.in)
Trade and Industry Measures: - Tariff Reductions: The government has reduced import duties on various consumer goods, including high-end motorcycles, to avoid protectionist trade signals and support domestic industries. (reuters.com)
- Support for Start-ups and Gig Workers: The budget increases support for start-ups and gig workers, recognizing their growing contribution to the economy. (ft.com)
Fiscal Outlook: - Fiscal Deficit: The fiscal deficit is estimated to be 4.4% of GDP, with total receipts (excluding borrowings) projected at ₹34.96 trillion and total expenditure at ₹50.65 trillion. (investindia.gov.in)
While the budget introduces measures to stimulate consumption and support various sectors, some analysts express concerns over the reduction in capital spending and infrastructure investment, which could impact long-term economic growth. (reuters.com)
For a detailed breakdown of state-wise allocations and further insights into the budget, you might find the following video informative:
Budget 2025: Understanding the allocation for States
Interestingly, one of the sources it referenced was the Financial Times (ft.com)—which I couldn’t access because of a paywall. Still, it was a useful starting point.
Of course, most of the budget details were beyond my interest or direct impact. One thing people were talking a lot about was tax cuts.
Curious, I asked:
What are the tax benefits for someone earning ₹10 lakhs versus ₹50 lakhs?
ChatGPT analyzed the numbers and presented a clear, well-structured table comparing the tax breaks for both income levels.
Here’s an easy-to-compare table showing the tax calculations for an individual earning ₹10 lakh and ₹50 lakh before and after the 2025 Budget:
# Income Tax Comparison Before & After Budget 2025
Annual Income | Tax Slabs (Before Budget 2025) | Tax Payable (Before Budget 2025) | Tax Slabs (After Budget 2025) | Tax Payable (After Budget 2025) | Tax Savings |
---|---|---|---|---|---|
₹10,00,000 | - ₹2,50,000 – No tax - ₹2,50,001 – ₹5,00,000 – 5% - ₹5,00,001 – ₹10,00,000 – 20% | ₹1,12,500 | - ₹3,00,000 – No tax - ₹3,00,001 – ₹7,00,000 – 5% - ₹7,00,001 – ₹10,00,000 – 10% | ₹50,000 | ₹62,500 |
₹50,00,000 | - ₹2,50,000 – No tax - ₹2,50,001 – ₹5,00,000 – 5% - ₹5,00,001 – ₹10,00,000 – 20% - ₹10,00,001 – ₹50,00,000 – 30% - 10% surcharge on tax | ₹14,43,750 | - ₹3,00,000 – No tax - ₹3,00,001 – ₹7,00,000 – 5% - ₹7,00,001 – ₹10,00,000 – 10% - ₹10,00,001 – ₹12,00,000 – 15% - ₹12,00,001 – ₹15,00,000 – 20% - Above ₹15,00,000 – 30% - 10% surcharge on tax | ₹13,09,000 | ₹1,34,750 |
# Key Observations:
- Individuals earning ₹10 lakh save ₹62,500 in taxes after the budget.
- Individuals earning ₹50 lakh save ₹1,34,750 in taxes, benefiting from lower tax rates at different slabs.
- The higher exemption limit (₹3 lakh vs ₹2.5 lakh earlier) and lower tax rates in mid-income brackets have contributed to these tax savings.
While I can’t blindly trust the AI’s calculations, I have a solid base to discuss with my CA or verify from other sources. That alone is a big win in convenience.
I also wanted to understand a CNBC YouTube interview with Ridham Desai Of Morgan Stanley discussing the budget. I shared the link with ChatGPT, but it couldn’t process YouTube video.
I want you to parse https://www.youtube.com/live/4XT7YBZZlyU?feature=shared and tell me the major points an individual retail value investor in India should know.
I could have written a small script to fetch the transcript, but I was feeling lazy. Instead, I sent the video to Readwise, which transcribed it for me. Then, I uploaded that transcript into ChatGPT for further analysis.
Here is the transcript. Analyse and give me major points
# Key Takeaways for Retail Value Investors in India from the 2025 Budget Discussion:
- Growth-Oriented Budget: The budget is described as a "magic budget" due to its dual focus on capital expenditure (capex) and consumption stimulus through income tax cuts.
- Capex Boom: Government capex is rising from 4.1% to 4.3% of GDP, focusing on new sectors—water, electricity distribution, and housing—diversifying from traditional infrastructure spending.
- Small & Mid-Cap (SMID) Recovery: After a correction phase, small and mid-cap stocks are expected to perform better, as growth momentum picks up.
- Consumer Discretionary Over Staples: The tax break will boost high-end discretionary consumption (luxury goods, services) more than basic consumer staples.
- Private Sector Banks as Immediate Trade: Private banks are seen as an attractive opportunity due to their valuation and expected economic expansion.
- Stock Picker’s Market: The market is shifting from macro-driven trends to micro stock selection, making research-based investing crucial.
- Stable Economic Policy Increases Valuation: India's predictable long-term growth and economic stability make equities attractive, even at higher valuations.
- Foreign Investment Optimism: Changes in GIFT City taxation and Safe Harbor rules could encourage foreign portfolio investments.
- Risk Awareness: Emerging market volatility could create short-term risks, but India may outperform in global downturns.
I quickly skimmed through the transcript in Readwise and found this to be a good summary.
I found it interesting that he said, small and mid caps will perform better than large caps. Naturally, I asked:
Why small and mid caps will perform better than large caps?
Out came:
Small and mid-cap (SMID) stocks are expected to outperform large caps due to several factors outlined in the budget discussion:
- Growth Momentum Post Correction: SMID stocks underwent a steep correction, and valuations have now stabilized, making them attractive for fresh investment.
- Government Capex Boost: Increased capital expenditure in new sectors like water, electricity distribution, and housing will benefit smaller companies involved in these areas.
- Consumption Stimulus: Income tax cuts may boost discretionary spending, benefiting mid-cap consumer discretionary companies more than large-cap staples.
- Higher Growth Potential: Smaller companies typically grow faster in economic upcycles compared to well-established large caps.
- Market Transition to Micro Trends: The shift from macro-driven market trends to stock-specific opportunities favors SMID stocks with strong fundamentals.
I don't know if this is what was discussed. Or did ChatGPT make this up. Even if ChatGPT made it up, it is still a good answer relevant to the discussion.
There was one missing point in the summary: comparison to China. So I asked this question:
what does the transcript talk about china vs india
Here is the answer:
The transcript briefly compares China and India in the context of stock market valuations and economic stability. Here are the key takeaways:
# 1. Terminal Value Difference
- The speaker argues that India has a higher terminal value than China.
- China's terminal value is close to zero, meaning long-term growth prospects for Chinese companies are uncertain.
- In contrast, India has strong long-term growth potential, making Indian stocks more attractive despite higher valuations.
# 2. Stock Market Valuations
- Chinese stocks appear cheap, but this is because the growth outlook is weak and investor confidence is low.
- Indian stocks, on the other hand, trade at higher valuations, but this is justified by India's predictable economic growth and stability.
# 3. Macroeconomic Stability
- The Indian government has focused on macro stability, making the economy more predictable and resilient for investors.
- China faces structural risks, reducing investor confidence in its market.
# 4. Foreign Investment Trends
- The transcript suggests that multinational companies see India as a safer destination for investment, especially after the new budget’s "Make in India" incentives.
- Recent policy changes in GIFT City (India's financial hub) are expected to encourage foreign investors to shift capital from China to India.
# Conclusion
India is positioned as a more stable and predictable market compared to China, making it more attractive for long-term investors. While Chinese stocks may look cheaper, India's policy consistency, growth potential, and investor confidence justify its premium valuations.
I didn't understand "Terminal value". So goes the question:
what does “the terminal value of companies is perceived to be near zero” mean? what is terminal value and how can it be zero for a country?
I learnt something new:
# Explanation of Terminal Value:
- What is Terminal Value?
Terminal value is a financial concept used in valuation to estimate the present value of a business's expected cash flows beyond a forecast period (typically beyond 5-10 years). It assumes that the company will continue operating and generating cash flows indefinitely or until a specific end point. Terminal value is a critical component in valuing businesses using the Discounted Cash Flow (DCF) model, as it often represents a significant portion of the total valuation. - Why is Terminal Value Important?
Terminal value reflects the long-term growth potential of a company or, broadly, of an economy. A higher terminal value indicates sustained profitability and growth prospects, while a low or zero terminal value implies minimal or no expectation of future growth.
# "Terminal Value Near Zero" in the Context of China:
When the source states that "the terminal value of companies is perceived to be near zero" in the case of China, it suggests that investors believe the long-term growth potential of Chinese companies and the overall Chinese economy is extremely limited. This is likely due to a combination of:
- Instability in economic policies.
- Slowing economic growth.
- Geopolitical risks and uncertainties.
- Regulatory crackdowns in key sectors that impair growth prospects.
In essence, the perception is that businesses in China may not provide significant future cash flows beyond a short forecast period. As a result, the long-term value component of these companies—and hence their intrinsic value—remains low.
# Conclusion:
"Terminal value near zero" reflects a lack of confidence in a country's or an economy's ability to sustain growth over the long term. While for China, this describes a pessimism about its economic future, India’s economic environment is seen as conducive to long-term growth, giving companies higher terminal values. This stark difference drives investor behavior and market dynamics in the two countries.
Even though I knew about DCF, I didn't know about "terminal value" and it was worth learning.
I also know this idea about "long-term pessimism about China" is bullshit. I have been hearing the same argument for the past two decades. But that's for a different post.
Now that I am aware of the speaker’s bias, I could factor it into my analysis.
What started as a simple curiosity about the budget turned into an insightful chatting and learning experience. I got a better grasp of taxation, investment concepts, and macroeconomic debates—all by asking AI targeted questions. Now I have some basis to discuss with my CA and other friends.
I hope I don't end up like Joey from Friends after reading just one book from the encyclopedia series! 😉
If you have any comments on how I used ChatGPT or on this content, please share your comments via Twitter or via Bluesky. Thanks.
Under: #aieconomy , #wealth