Budget balances fiscal discipline, welfare & growth

Synopsis

This year’s interim budget, presented by Finance Minister Nirmala Sitharaman, takes place in a turbulent global economic environment. Despite this, the budget maintains a balance between economic growth and fiscal consolidation, with a fiscal deficit of 5.1% of GDP. The budget also supports capital expenditure and rural infrastructure, promotes investment in post-harvest infrastructure, and establishes a corpus for interest-free loans to support research and innovation.

This year’s interim budget has come on the back of a turbulent global economic environment marked by slowing global growth and rising volatility. Against this backdrop, Finance Minister Nirmala Sitharaman has very nicely balanced fiscal discipline, welfare necessities and inclusive economic growth.

To everyone’s very pleasant surprise, the balance between economic growth and fiscal consolidation has been maintained with the fiscal deficit for FY25 budgeted at 5.1 % of GDP. This is better than CII had suggested and the adherence to strict fiscal management will improve macroeconomic stability and support sustainable economic growth. This also provides sufficient headroom to prepare for any further global shocks. With capital expenditure for the next year budget to rise by 11.1%to ₹11.1 lakh crore, economic growth will continue to be strongly supported.

Encouragingly, capex support to states is to continue with a significant allocation. This will crowd in private investments, green shoots of which are already visible as mentioned by the FM. Three major economic railway corridor programmes will improve logistics efficiency, reduce costs and make the industry competitive, which is welcome. The decision to encourage greater adoption of e-buses for public transport networks through a payment security mechanism also brings cheer to industry. The proposed capex has an important component of support to rural infrastructure.

Two crore more houses are to be taken up in the next five years under the PM Awas Yojana (Gramin). This will be accompanied by a scheme for middle class families to buy or build their own homes. Within agriculture, public and private investment will be promoted to build post-harvest infrastructure which will reduce the scale of wastage between production and consumption. These are all welcome steps that will support the rural economy and consumption, and are in line with several CII recommendations.

CII also applauds the government for the establishment of a substantial corpus for long term, interest free loans to help the private sector scale up research and innovation in sunrise domains. This will provide an impetus for start-ups and support technology development, both critical to India’s future economic growth.

The government’s intent and its focus on clean energy and sustainable development were reflected in several announcements including rooftop solarization scheme through which 1 crore households will be enabled to obtain up to 300 units free electricity every month, extending the benefits to the common man. This year’s budget was also marked by support to Nari Shakti as a means to Rashtra Shakti. The success of 83 lakh self-help groups (SHGs) in assisting one crore women to become ‘Lakhpati Didis’ was recognized, and the target is to cover 3 crore women now.

This combined with government’s plan to continue support to India’s eastern region will promote inclusive social and regional development in line with Prime Minister’s call of ‘Sabka Saath, Sabka Vikas, Sabka Vishwas’. This follows the leadership India has taken globally in the Alliance for Global Good – Gender Equality and Equity that was launched in Davos last month.

Overall, this year’s interim budget has been a promising and a forward looking one, which gives a clear direction for the future to help India achieve fast, resilient, inclusive and sustainable growth on its path to becoming a developed economy by 2047.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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