India stands as a shining star amid the dull landscape of slowing global growth. Its economic strategy of fiscal prudence and capital expenditure-led growth has received global acclaim.
India has also redefined the paradigm of citizen welfare, with a focus on providing access to basic amenities and services to all on a universal basis, including affordable housing, rations, electricity, clean cooking fuel and drinking water, access to quality and affordable health care and education, and more. The welfare programmes aim at empowerment through a women-led development model for addressing gender inequalities and giving access to credit, including to the tiniest of economic entities with no credit history such as the street vendors and artisans etc. This paradigm change has indeed made India’s growth broad-based and inclusive. The interim budget takes forward all these.
The Confederation of Indian Industries (CII) was expecting the interim budget to focus on fiscal prudence, capex-led growth and programmes and schemes to support the most vulnerable sections of the society in a manner that has an overall positive impact on India’s long-term economic growth, resilience and inclusion. The interim budget has delivered on all these counts.
With a fiscal deficit of 5.8 percent for 2023-24, the government has achieved beyond the target of 5.9 percent it had set for itself in the last budget. The 2025-25 fiscal deficit target of 5.1 percent, which is much better than what was widely expected, reassures us that India is resolutely on the path towards achieving a 4.5 percent fiscal deficit by 2025-26. Fiscal prudence is important for macroeconomic stability and helps build economic resilience at a time when the global economy is facing uncertainties in a geopolitically turbo-charged world.
The budget provides continued support to growth through a capex outlay of Rs 11.11 lakh crore, an increase of 11.1 percent over the last year’s base which was quite high due to tripling of the capital expenditure outlay over the past four years. The support for state capex continues, with the budget providing Rs 1.3 lakh crore towards interest-free, 50-year loan and Rs 75,000 crore for milestone-linked reforms at the state level.
There are notable signs of recovery in private investments and improvement in capacity utilisation in some sectors This is clearly reflected in multiple CII surveys. Higher capex from both the Centre and the states will help boost the recovery in the private capex, another important engine of economic growth.
The proposals on partnering with states to take forward the next generation of reforms in addition to the reforms-linked capex support is a very important intervention that will help unlock India’s true growth potential. Support to states for faster development of aspirational districts and blocks as also the stress on promoting tourism, along with special focus on the development of India’s eastern region, will not only drive growth but also lead to a regionally-balanced economic development.
The schemes to boost rural economy will enhance rural incomes and lead to an increase in rural demand, in addition to driving inclusive growth. The emphasis on promoting public-private investment in post-harvest activities will attract food-processing industries and help raise farmers’ incomes and generate jobs.
The initiative for achieving atmanirbharta for oil seeds, comprehensive programme for supporting dairy farmers, boost to aquaculture through a stepped-up push to Pradhan Mantri Matsya Sampada Yojana and setting up of five integrated aquaparks will all help add value in the agri and allied sectors, making a direct and positive impact on the rural growth and incomes. This would further fuel India’s consumption growth.
Welfare measures such as building an additional two crore houses under the Pradhan Mantri Awas Yojana (Grameen), new housing scheme for the middle class, and revising targets for Lakhpati Didi programme from 2 crore to 3 crore will all contribute towards raising the incomes and standards of living of the vulnerable sections of the population. This will also help expand the rapidly growing Indian consumer market.
In addition to demand generation through capex, interventions to energise the rural economy through demand-generating welfare measures, the interim budget has many other provisions to cheer the industry. The `1-lakh-crore corpus to provide long-term financing or refinancing at low or nil interest rates will help the industry step up R&D and technology adoption, which will help it become globally competitive and prepare for the technology-driven economy of the future.
The commitment to facilitate access to credit for Micro, Small and Medium Enterprises, help with skill development while providing relevant technology, and a facilitative regulatory environment will help boost the country’s manufacturing ecosystem. Re-invigorating the financial sector for scale, capacity, skills and regulatory framework will ensure adequate financing to all sectors of the economy, including industry. The interim budget also reiterates the move towards atmanirbharta through the proposal to launch a new scheme for strengthening deep-tech technologies for the defence sector.
Sustainability has attracted high attention in the interim budget. As India gears up to be a clean and green economy, providing viability gap funding for 1 GW of offshore wind energy, enhancing coal gasification and liquefaction capacity, and strengthening the e-vehicle ecosystem through support to manufacturing and charging infrastructure are all important initiatives. Overall, the provisions in the interim budget are in the right direction towards unlocking India’s growth potential.
Chandrajit Banerjee, Director General, the Confederation of Indian Industries