There are four cornerstones in the interim Budget that demonstrate the government’s priorities for the years ahead. First of all, the fiscal consolidation remains a top priority, much to the comfort of analysts and markets. While the fiscal deficit will be 5.1 per cent for FY25, the FM showed a roadmap and a path to 4.5 per cent by FY26, riding on the strong economic growth, higher revenue receipts and the increasing formalisation of the economy.
Secondly, the sustained investment in infrastructure which has been hiked by 11.1 per cent to ₹11.11-lakh crore and spread across railways, roads, Aviation, and every kind of infrastructure that the country needs to enable access for movement of goods and services and people. This will lead to a path faster path of higher economic growth and broader prosperity. The government has been doubling infrastructure investments for the last few budgets especially post the pandemic, with the private investments remaining muted. The economic multiplier from the ongoing infrastructure investments is already visible through better mobility and overall economic productivity. The tempo is likely to be maintained in the full Budget as well.
Third, the government has not digressed from social inclusivity and social justice schemes, especially women and farmer empowerment. Through the JanDhan, it has brought in a large section of unbanked into the system and then through DBT, it has made them a participant in the economic cycle. Now, going by the hints in the interim Budget, various vulnerable sections will be brought into the mainstream through credit and project inclusion. Here, I would like to single out the PM Awas Yojana at the rural level which has added another two crore houses to the current target of three core dwellings. This would significantly add value to the housing sector and rural economy.
Fourth, we can expect less crowding out of the private sector when it comes to borrowing. The Budget has outlined gross and net market borrowings through dated securities at ₹14.13 lakh crore and ₹11.75-lakh crore, respectively, in FY25 which will be lower than FY24 figures. As the private investments continue to improve, a lower borrowings target by the Government would certainly lead to availability of more credit for the private sector at far more competitive rates.
Another point that is worthy of mention is the plan to promote innovation and technological excellence especially among the youth through a ₹1-lakh crore corpus fund that would give out interest-free long-term loans. The government has clearly recognised that without state support, research innovation would suffer. If India has to achieve atmanirbharata in as many areas, this was critical.
Equally significant is the effort to include States in the development efforts and giving them encouragement to bring out reforms to realise the dream of ‘Viksit Bharat’. The Budget provisions ₹75,000 crore as fifty-year interest free loan to support those milestone-linked reforms by the State Governments. This is significant, given that the debts of most states remain high at 31-32 per cent of their GDP, leading to stalling of development projects and higher overall borrowings.
The country-wide attention created by the G20 meetings first, and then the Ram Mandir at Ayodhya and the Prime Minister’s trip to Lakshadweep seem to have brought the attention back to domestic tourism and its immense possibilities to generate economic growth, which some peg at close to 1.5% of the GDP. Here too, the Budget is encouraging States to take up comprehensive development of iconic tourist centres, branding and marketing them at global scale, using the incentive of long-term interest free loans. Tourism has greater multiplier effect on the local economy than many other sectors and we are anticipating a tourism boom in the next few years.
Finally, the country has been one of the biggest beneficiaries of FDI inflow during 2014-23 at $596 billion. Now, the Budget has proposed to sustain this growth using bilateral investment treaties with foreign partners, terming as FDI or ‘first develop India’.
It may be a cliché to say, but the fact is that even the interim Budget has something for every sections of the society which seems quite impressive. Key successful ideas, infrastructure investments, financial inclusion, housing for all, youth, women and farmer empowerment – all have been sustained with more ideas and allocations while the symbolic economic benchmarks – such as the fiscal deficit – has been kept in the check to improve the country’s attraction for global markets.
That makes the upcoming full Budget more interesting and exciting.
The author is Whole-time Director, Kotak Mahindra Bank