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:

Prompt

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:

Prompt

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:

  1. Individuals earning ₹10 lakh save ₹62,500 in taxes after the budget.
  2. Individuals earning ₹50 lakh save ₹1,34,750 in taxes, benefiting from lower tax rates at different slabs.
  3. 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.

Prompt

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.

Prompt

Here is the transcript. Analyse and give me major points

# Key Takeaways for Retail Value Investors in India from the 2025 Budget Discussion:

  1. 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.
  2. 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.
  3. Small & Mid-Cap (SMID) Recovery: After a correction phase, small and mid-cap stocks are expected to perform better, as growth momentum picks up.
  4. Consumer Discretionary Over Staples: The tax break will boost high-end discretionary consumption (luxury goods, services) more than basic consumer staples.
  5. Private Sector Banks as Immediate Trade: Private banks are seen as an attractive opportunity due to their valuation and expected economic expansion.
  6. Stock Picker’s Market: The market is shifting from macro-driven trends to micro stock selection, making research-based investing crucial.
  7. Stable Economic Policy Increases Valuation: India's predictable long-term growth and economic stability make equities attractive, even at higher valuations.
  8. Foreign Investment Optimism: Changes in GIFT City taxation and Safe Harbor rules could encourage foreign portfolio investments.
  9. 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:

Prompt

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:

  1. Growth Momentum Post Correction: SMID stocks underwent a steep correction, and valuations have now stabilized, making them attractive for fresh investment.
  2. Government Capex Boost: Increased capital expenditure in new sectors like water, electricity distribution, and housing will benefit smaller companies involved in these areas.
  3. Consumption Stimulus: Income tax cuts may boost discretionary spending, benefiting mid-cap consumer discretionary companies more than large-cap staples.
  4. Higher Growth Potential: Smaller companies typically grow faster in economic upcycles compared to well-established large caps.
  5. 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:

Prompt

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.
  • 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:

Prompt

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:

  1. 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.
  2. 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.

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Under: #aieconomy , #wealth