Opinion How to build a Viksit Bharat? One step at a time, as budget and FTAs show
Leveraging trend, continuing reforms, structural fixes and facilitations, and FTAs weave a latticework of growth impulses
Importantly, technological advancements will continue to engender job displacements and disruptions Imagine the building of a grand structure — man and machinery working to a plan, concerted, calculated and careful, level after level, to reach the top. The vision of Viksit Bharat by 2047 is one such structure. And each budget is a veritable stepping stone towards that overarching vision.
The government has launched several initiatives towards that vision in recent years. Among others, it has prioritised and financed infrastructure buildout through the budget, fast-paced digitalisation and technology adoption, and initiated economic reforms to improve the business environment. Those measures have begun to raise the country’s potential growth rate, too. The latest Economic Survey raises the estimate by 50 basis points to 7 per cent from 6.5 per cent pegged three years earlier.
The momentum on reforms has gained pace this fiscal, accompanied by the signing of several free trade agreements that will stimulate domestic activity and diversify India’s trade partners. The just-announced trade deal with the United States, and the one with the European Union earlier, and another half a dozen signed, should lend material thrust to the growth impulse over the next few years. India’s export competitiveness in the US market—comprising a plethora of product lines—should improve with this and lift investor sentiment.
On its part, the budget intends to build on the advances made to support the country’s growth trajectory. That is the right strategy in today’s increasingly protectionist and highly uncertain global environment. So is maintaining fiscal prudence, which gives the government the flexibility to support the economy while preserving macroeconomic stability.
The budget continues the fiscal rectitude that the NDA government has pursued, notwithstanding the setback caused by the Covid19 pandemic at the start of the decade.
The government has already achieved its medium-term fiscal deficit target this fiscal and now moved to a targeting debt/GDP which is in line with international best practice. For next fiscal, the budget has set the target for fiscal deficit at 4.3 per cent of GDP, consistent with the objective of bringing down the debt ratio.
The quality of spending continues to improve as focus is on reducing revenue expenditure rather than capital expenditure as a percentage of GDP. The nominal GDP growth at 10 per cent and tax collections are conservatively estimated and achievable. The government has increased the divestment target sharply to Rs 80,000 crore next fiscal from nearly Rs 34,000 crore this fiscal. This will require frontloading of efforts as meeting divestment targets has proved onerous in recent time.
The budget has taken steps to support both manufacturing and services sectors.
Within manufacturing, the focus is on incentivising new-age sectors such as semiconductors, data centres, biopharma and electronics, without losing sight of legacy sectors such as textiles and MSMEs. The budget aims to achieve the objectives via tax reforms, rationalising customs duties and easing the import process. Notably, Crisil expects these new age sectors to account for a quarter of the country’s industrial capex in next five years, up from 12 per cent in fiscals 2021-2025.
In addition to establishing a high-powered Education to Employment and Enterprise Standing Committee, the budget has introduced several measures to strengthen the services sector. These initiatives are evident in the renewed emphasis on tourism, healthcare, education, sports and tech services, supported by tax reforms and targeted budgetary allocations.
The announced steps aim both to address skill mismatches and to capitalise on emerging opportunities within the rapidly expanding services sector.
Of particular significance is prioritising experiential tourism—a segment that attracts affluent travellers seeking unique experiences—represents a pragmatic response to the Kshaped global recovery, in which wealth is increasingly concentrated among the well-off.
The focus on medical and heritage tourism, as highlighted by Finance Minister, has the potential to generate employment in the hinterland. Notably, these jobs are relatively resilient to the workforce disruptions anticipated from the rise of artificial intelligence.
Importantly, technological advancements will continue to engender job displacements and disruptions. It is therefore imperative to push economic activity in labour-absorbing services such as healthcare and tourism.
All said, the fiscal restraint is intact, ensuring the budget is non-inflationary.
Exactly what the doctor ordered.
Amish Mehta is Managing Director and CEO, Crisil Ltd
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