The Middle Class Is Happy. Is That Enough For India?

Instead of devising a clear call for action to surpass these projections, Budget 2025 seems to have been designed keeping in mind these projected figures. 

Already, the Economic Survey had stated in no uncertain terms that India's growth trajectory had slowed down, and that it was time for some changes with big impact that would help steer India's growth onward and upwards. Budget 2025 should have been a wake-up call for India's polity.

Instead, if one analyses the vision laid down by the Budget, it becomes apparent that it deviates from the intent outlined in the Economic Survey in ways that are not only stark, but also disappointing. 

Yes, the Budget has made the middle class happy and has focussed on driving consumption, but with food inflation still at 8 per cent, will the money in the hands of consumers drive spending up, or would it be just enough to cover for the food inflation?

If food inflation is not controlled, the fiscal stimulus through tax breaks will amount to very little. 

The Budget has also stated that the government will forego a revenue of Rs 1 lakh crore due to the tax changes. However, it has pegged revenue deficit for the year at 1.9 per cent, and even projected to come down further to 1.5 per cent next year, from last year's 2.6 per cent.

The fiscal deficit also seems under control at its current 4.8 per cent, and the projection of 4.4 per cent for next year. It is understandable that with lower spend on infrastructure and some tight fisted control on subsidy and welfare scheme spends, the fiscal deficit can be managed. However, it is unclear how the government plans to reduce the revenue deficit to its projected targets. 

In the past, two sources of revenue have been relied upon. First, dividends from the Reserve Bank of India (RBI), which could still be the case. Second, revenue from disinvestment. This Budget has once again failed to mention anything clearly on the latter.

U-Turn On Disinvestment  

Neither is there a disinvestment target, nor even its mention in the revenue receipts of the Budget. The NITI Aayog had already come out with a detailed disinvestment plan for the government, and yet, there is little-to-no progress visible since the Air India privatisation. 

Furthermore, the total amount of money the government has "invested" in public enterprises last year, as per Budget documents, is Rs 8.99 lakh crore. Of this, around Rs 4 lakh crore is earmarked for the Railways (Rs 2.6 lakh crore) and roads and highways (Rs 1.67 lakh crore). This still leaves a staggering Rs 5 lakh crore that has been pumped into public investments, by way of debt or equity transfers.

Sample this: The Ministry of Petroleum and Natural Gas has an investment of Rs 1.3 lakh crore, Ministry of Power has an allocation of Rs 55,049 crore, and BSNL alone had an investment of Rs 57,298 crore. These are actual figures for 2023-24.

The revised estimates for 2024-25 towards investment in public enterprises is Rs 9.3 lakh crore. The budgeted estimate for 2025-26 is Rs 9.6 lakh crore.

Even HMT, which was sold off in 2022, got a capital infusion of Rs 4.64 crore in 2023-24, followed by Rs 9.35 crore in 2024-25 (revised upward from the budgeted Rs 6.67 crore), and finally, Rs 7.05 crore earmarked for 2025-26.

At a time of fiscal consolidation, this begs the question: Should the government be "investing" such a large part of the Budget in public enterprises, when earlier Budgets have spoken about divestment? In fact, for the sake of fiscal prudence, it is time for the government to deliver on those promises. 

This Budget missed the opportunity to challenge itself. It will no doubt ensure that India meets the 6.3-6.8 per cent growth rate, but the real question is: Is this enough? This Budget should have focussed on delivering — if not reforms, at least on its intent from the suggestions made in the Economic Survey.

Deregulation: Need Of The Hour 

There is a desperate need for private investment. If it is indeed true that the private sector is sitting on large amounts of cash, then it is important to understand why this is so, and what needs to be done. Deregulation would have been a good start, but the Budget only spoke of decriminalisation, not deregulation. 

The government must seriously consider if taking pride in India as the fastest growing economy is enough, or if we should set our growth targets based on what is required for the country to become Viksit Bharat by 2047.

One can only hope that in the months to come, the government will put to action some of the more necessary reforms, including deregulation and disinvestment, to reach the 8 per cent growth rate necessary to reach the 2047 target. 

(The writer is co-founder & CEO, Policy Consensus Centre, specialising in policy research and advocacy in the financial sector, gold ecosystem, retail, e-com, MSMEs and digital economy)