It had her signature all over it with capital investment leading the way and some very precise calibration aimed at reforms, trade promotion, rural development, digital transformation and sustainability. However, this time, there was a surprise package. A normally tight-fisted FM displayed her compassion and generosity for the masses by opening her purse on the personal income-tax (I-T) front.
Behind the feel-good aspects of the budget rests a robust engine with a few resolute pillars.
A gigantic capital investment outlay of ₹13 lakh crore forming 14.5% of GDP is aimed at spurring domestic economic activity and employment. India has successfully followed a path of infrastructure spending during the post-Covid period, and this focus continues. Railways, with a ₹2.4 lakh crore budget, is a critical element of this, with an aim to also add substantial first- and last-mile connectivity to the existing road and port networks.
A set of new initiatives has been announced aimed at reforming agriculture. If India can pull this off, this could be a game-changer and usher in a new era of prosperity in the country’s vast rural landscape.
Digital and energy transformation initiatives encapsulate the futuristic agenda of Sitharaman’s latest budget. From expanding the scope of DigiLocker and 5G labs to e-courts and digital skill centres as portals for investors and companies, GoI‘s aim to keep India technologically enabled is clear.
On the energy transformation front, the FM announced a target of 5 million metric tonnes green hydrogen by 2030, a ₹20,000 crore project in Ladakh for renewable energy, with an overall ₹35,000 crore for energy transition and the net-zero journey. The biogas outlay of ₹10,000 crore and a push for natural farming tug at the heart of India’s capability. Should these achieve their targets, we are on to something truly transformative for rural India. Fiscal discipline is the fourth pillar. While the ratio of capital expenditure to total expenditure has increased significantly, there is room to make balancing adjustments in case the tax revenues do not reach budgeted levels. The planned reduction in fiscal deficit to 5.9%, and a promise to reach under 4.5% by 2025-26, should give sufficient comfort to investors who are keen to bank on the India story.
There are also some interesting moves to usher reforms in the banking sector. The electronics sector, in particular mobile phones and television manufacturing, should see better times with some of the imports of critical components being rationalised. Startups will continue to enjoy tax holidays.
The implications of this budget would largely be visible in the long term. Directionally, this budget stays on course to take forward GoI’s long-term plans to take India to the summit of the global economic order. In the present global scenario, with fears of recession in the West, India’s performance stands out. There are likely headwinds that are expected due to trade imbalances that may occur if exports fall. However, it does not take away from the fact that it is an excellent budget.
Further, the reduction in personal I-T rates has brought a smile on everyone’s lips, which will, in turn, lead to greater consumption and also savings, both of which augur well for the economy.
A valuable aspect of India’s fiscal journey is the discipline and resolve shown by the Narendra Modi-led government to ensure that it always remains balanced among growth, development and inclusiveness. We could not have asked more from this budget and the FM should be congratulated for staying on course.
