
On the political front, the Union government has shored itself well with convincing wins in Haryana and Maharashtra. But the bleak economic scenario—and growing global headwinds—have pushed the finance ministry pundits into a pre-Budget huddle.
Reports suggest the government is keen on several measures to reverse the pronounced slowdown and tepid consumption. India’s GDP growth is projected at 6.4 percent for 2024-25, the slowest in four years. This will be a drag on the next year too, with growth projections for 2025-26 not exceeding 6.7 per cent.
Discussions in the huddle seem to be underlining tax relief for the middle class to boost consumption, protecting industry from external competition with tariffs. and boosting private investment and job creation.
Meanwhile, global challenges are threatening to raise the cost of living again. The latest sanctions by Washington have put Beijing and Delhi on notice on discounted oil purchases from Moscow.
This will mean shifting to more expensive crude from West Asia and elsewhere. At the same time, volatility in international markets has sunk the rupee to its lowest at 86.62 against the dollar.
Exports should have benefited from this change, but a sharp fall in the export of petroleum products and a surge in gold imports widened the trade deficit to a record high of USD 38 billion in November. Import-dependent industries like automobiles and IT will soon be forced to raise prices.
By all indications, the Budget needs a heavy dose of stimulus to crank up demand and consumption. Tax breaks is one way to put more money in the consumer’s pocket—in other words, a bailout for the middle class.
Creating jobs—not just through government infrastructure spending, but through enhanced private investment—is another route to the same end. Empowering millions of smaller enterprises through easier rules and credit access must not just be a slogan.
Funding of financial technology services, at $1.9 billion this year, has shrunk for the third year in a row. These trends have to be reversed. Job creation, more than bailouts or handouts, is a more sustainable way to spur growth. That is why the government must extend the success of the rural employment guarantee scheme to urban India with incentives for labour-intensive industries such as construction, textiles and tourism.