The budget’s horizon is closer: Just as our growth challenge needs it to be

The big difference this time, though, was an economic slowdown in 2024-25. In one analysis, this was the result of a foot taken off the spending pedal by the government, an election hitch that revealed just how heavily growth depends on it, even as credit growth flagged. 

In another analysis, a post-pandemic upspring exhausted itself, even as a K-shaped recovery began to hurt, with an upper-end boom no longer masking the mass stagnation in wages that held back private consumption and investment. As these two need to form a virtuous cycle of mutual support, this budget had to focus more on the near-term than usual to aid the economy. And that too in a global context of new risks and uncertainty.

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Impact immediacy has been the 2025-26 budget’s foremost priority. In response to signs of an economic slump, Sitharaman unveiled a direct stimulus in the shape of tax relief aimed at leaving more money with consumers who drive sales trends. 

Personal income-tax slabs have been elevated and spaced further apart. As a result, the Centre expects to forgo ₹1 trillion, although it’s relying on tax buoyancy for a larger mop-up. As for outlays, with total expenditure for 2025-26 set at ₹50.6 trillion, the keystone remains capital expenditure, earmarked at ₹11.2 trillion, a new peak. 

This is a sign of the Centre’s confidence not just in this agenda, with its mix of short- and long-horizon gains, but also in its capacity to make full use of it amid scepticism evoked by missed targets; its revised capex for 2024-25, at ₹10.2 trillion, falls short of its initial ₹11.1 crore target. That welfare spending would also be kept up was a given. So was the attention devoted to Bihar, due for polls this year. 

Also Read: Vivek Kaul: India’s GDP growth slump holds lessons in forecasting

Sitharaman’s declarations on ‘light-touch’ regulation, insurance, nuclear power, digital enablers, clean-tech and asset recycling take a distant view of where our economy must go. On trade, though, it’s unclear how far ahead the policy tweaks look. Import duties have been dropped on a range of inputs for various sectors. With global shipments staring at choppy seas, tactical tariffs may be fine, but a proper export orientation would need low import barriers across the board, even as needless rules that slow business down are peeled away.

On the macro front, a fiscal deficit target of 4.4%-of-GDP for 2025-26 meets the Centre’s glide-path promise, with future gaps to go by a plan to keep its debt burden in check. In this context, India’s fiscal law needs to be redrafted. Our economy has seen enough ups and downs for the government to thrash out rules that will endure. The endurance we most critically need, however, is that of our rapid economic emergence. 

Also Read: Does India’s fiscal profile need a facelift?

Critics would argue budgets that do not invest enough in basic education and healthcare don’t address the risk of growth slowing prematurely if prosperity retains its upper-end skew, early flashes of which may already be visible. Yet, given the spending trade-offs made for the upward path India has adopted in recent years and the current urgency of a consumption boost, the budget’s focal points reflect an aptly responsive remix. And that’s good news.