This first Budget in Amrit Kaal successfully builds on the foundation laid in the previous Budgets and draws a blueprint for India@100. On one hand, the Budget ensures that investment and consumption momentum in the economy remains intact, while at the same time emphasises “inclusive” growth and the need to exploit the demographic dividend through various initiatives around youth empowerment. Reduction in personal taxation and stability in corporate taxes fuels the consumption and investment growth engines of the economy.
While India has emerged as a strong services economy, agriculture and industry have remained relatively stagnant over the years. The previous Budgets focused on manufacturing push through various PLI initiatives. The current Budget switches focus to agriculture, while creating a pathway for innovation and technology. The Budget also recognises the country’s commitment to achieve net-zero carbon emission by 2070 though its various initiatives around energy transition, green hydrogen as well as storage and evacuation projects.
Capex-led push has been the key over the past few years given the larger multiplier effect on employment and inclusive growth. It is heartening to note that the Capex outlay has been increased to `10 trillion, a steep increase of 33% over the current year. Through various grants and concessional loans, this Budget is clearly nudging states to spend more on capex, thereby joining the mainstream of India’s growth agenda. The Budget permits the states to operate at a fiscal deficit of 3.5% of GSDP.
For the India investment story to succeed during the Amrit Kaal period, it is important to be best in class with respect to project planning, optimal risk sharing, sanctity and enforcement of contracts and dispute resolution mechanism. The emphasis by the government on ease of doing business should translate into facilitating processes for quick project approvals and clearances. Policy errors and mis-steps in implementation, however, needs to be guarded against.
The assumptions around nominal GDP growth and tax collections for FY24 seem well anchored and therefore fiscal deficit of 5.9% seems achievable. The FM has reiterated her intention to bring down the fiscal deficit below 4.5% by FY26. The economic prudence underlying the Budget plans augurs well for the country.
Thrust to digital technology continues to be an important link for encouraging innovation, entrepreneurship and scaled-up commerce. Initiatives to step up the skill development infrastructure, creation of centres for artificial intelligence, etc are moves in the right direction with an eye on creating opportunities for the future generations and unleashing the country’s potential.
The writer is Wholetime Director & CFO, Larsen & Toubro
