The government’s 2025 Union Budget promises growth, innovation, and self-reliance. But beneath the ambitious rhetoric, one persistent problem remains unaddressed over-taxation. The ever-growing tax burden on consumers and businesses continues to stifle economic activity, reduce purchasing power, and limit choices for ordinary Indians. While the government proudly claims that its policies will accelerate growth, its taxation approach achieves exactly the opposite of its stated goals.

The Indian tax system remains a big black hole, where high direct and indirect taxes consume a sizable chunk of disposable income and stifle consumer spending. The economic survey also acknowledges India’s struggle to bolster the production of essential goods to aid economic growth. Yet, instead of reducing financial strain and simplifying taxes so that production is easier and ordinary consumers have more money to spend, the budget reinforces the system that drains taxpayers without delivering benefits. The government’s National Manufacturing Mission aims to bolster India’s industrial sector, but high taxes on raw materials and corporate earnings discourage risk-taking and innovation. Consider India’s EV sector, which faces import duties of up to 70 per cent on key components. While the Budget talks about promoting domestic production, it simultaneously penalizes companies reliant on global supply chains.

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Consumers, in turn, face limited choices and higher costs for electric vehicles, slowing adoption and sustainability goals. Reckless government spending and high taxes often cause consumers to pay the price in the form of hidden taxes. Argentina serves as a prime example of the consequences of decades of high spending and heavy taxation eroding the purchasing power of consumers. India risks heading down the same route if taxation continues to outpace economic growth and productivity. The government should remove wasteful subsidies, simplify spending, and create a tax system that empowers consumers and promotes growth. A pro-consumer tax system should focus on transparency, lower tax rates, and efficiency.

The Union Budget could have adopted Singapore’s approach, with low tax rates and minimal bureaucratic barriers, transforming the country into a global business hub while keeping goods and services affordable for consumers. India can follow suit by streamlining taxation and reducing rates in essential sectors fostering economic growth and consumer prosperity. The government should forge a system that promotes innovation, investment, and consumer choice. The Irish tax reforms of the 1980s and 1990s are a striking example of tax policy driving economic growth. Ireland took bold steps to address the economic stagnation, slash corporate tax rates, and streamline the tax structure.

This led to the economic boom called the “Celtic Tiger” era. With greater foreign investment, businesses thrived, and consumer spending increased significantly. India could benefit by adopting a similar approach by cutting down corporate tax and adjusting income to stimulate domestic demand and foster a dynamic and competitive economy. The government’s vision for India’s economic future is ambitious, but its reliance on high taxation contradicts its goals. To truly empower consumers, policymakers must recognize that lower taxes lead to higher economic participation, increased consumer spending, and greater business expansion.

Instead of burdening citizens with excessive levies, India should take inspiration from global success stories and craft a taxation framework that fuels – not hinders – growth and prosperity. If India wants to achieve genuine self-reliance, it must start by letting consumers decide how to spend their own money rather than dictating it through over-taxation.

(The writer is Indian Policy Expert, Consumer Choice Centre.)