2025 Budget: Will It Trigger the Right Animal Spirits?

The Budget appears to have ticked all the boxes necessary to be on the path to a Viksit Bharat by 2047. However, a lot will depend on the extent to which various multiplier effects kick in

- DEBOPAM CHAUDHURI

With Saturday's announcements in the Union Budget for the financial year 2025-26, fiscal policy has scored higher in the resolve to resurrect India's sagging growth, while monetary policy still languishes with its band-aid solutions to plug short-term liquidity deficits.

After the finance ministry's bold measures, even at the cost of fanning some retail inflation, it is now expected that the Reserve Bank of India will finally start cutting rates, something they should have done at least six months ago.

Combined expansionary fiscal and monetary policies have a good chance to free India from its present growth malaise and gradually reach the desired 8 percent rate required for attaining the aim of Viksit Bharat by 2047 (Economic Survey 2024-25).

With a growth rate of 6.4 percent in FY25 and 6.8 percent (optimistic) in FY26, India is slated to lose out on ₹8 lakh crore of national income (considering it had to grow at 8 percent). It will take a lot more than good intent and political will to earn this back while maintaining an average 8 percent growth over the next few years.

The Budget appears to have ticked all the boxes necessary to attain this. However, unlike physical sciences, economics is a subjective and behavioral field. There are no predefined formulas like E equals MC squared that will always hold true come what may.

A lot will depend on the extent to which various multiplier effects kick in, given the choices made for allocating expenses in the Budget.