India has consistently garnered praise from the investor community, particularly external investors, for its robust growth rate of 8.2 per cent. This achievement is notable, especially given the challenging global environment marked by increasing geo-fragmentation and the rapid deceleration of other economies, which are further hampered by the demographic challenge of an ageing population. Crucially, India’s potential for growth has also increased. It is imperative not only to protect this current position but also to signal India’s aspiration to emerge as one of the top economies globally and significantly contribute to the world GDP.

Macro stability

This Budget must be viewed through this lens. Of immense importance to global investors is macroeconomic stability, which could not have been achieved without the government’s substantial efforts to contain the fiscal deficit. This is particularly commendable given the fiscal stress endured during the pandemic, which had elevated the fiscal deficit-GDP ratio to 9.2 per cent. Swiftly, this has been reduced to 5.6 per cent in FY24, with a target of 4.9 per cent in FY25.

From a macroeconomic perspective, efforts at fiscal consolidation have also enabled the reduction of the current account deficit to just 0.7 per cent of GDP in FY24.

Consequently, the RBI has been able to build up foreign exchange reserves that can be utilized if necessary.

While every Budget is important, recent announcements should be seen as a continuum of decisions with implementation strategies that span multiple years. Previous Budgets have advanced agendas such as Swachh Bharat, water and housing for all, and a clear fuel strategy through the PM Ujjwala Yojana.

With substantial progress in improving living standards and Ease of Doing Business, it was essential for this Budget to focus on strategies that could enhance disposable income. According to the latest data, per capita income in India is approximately $2730, compared to $5270 in Indonesia and $7810 in Thailand.

India has historically struggled to break free from the middle-income trap, which is a critical aspect of its aspirational journey towards becoming “Viksit”. This transformation cannot occur in a single year, but a beginning needed to be made.

Multi-modal approach

Hence, this Budget serves as a blueprint for the future, driven by investments in modern infrastructure and guided by a multi-modal approach to enhance productivity, employment, skill development, and boost the MSME sector through increased credit availability. The Budget’s mantra is to employ the unemployed, skill the employed, and formalize the informal sector. This is the first instance where the private sector is envisioned to work collaboratively with the Centre and State Governments to realize the vision of Viksit Bharat.

Thoughts have also been directed towards creating a robust financial sector ecosystem, improving outcomes under the Insolvency and Bankruptcy Code (IBC), and strengthening the Debt Recovery Tribunal. The Budget also considers future steps towards factor market reforms and unleashing market forces to generate the desired economic momentum. In many ways, this Budget is a landmark, aiming to harness the demographic dividend and propel India into the next three decades of its economic journey.

The writer is Managing Director & CEO, Yes Bank

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