Responsive and Responsible

It's high time India Inc started investing as the govt can't keep doing the heavy-lifting forever

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Finance Minister Nirmala Sitharaman's Budget for 2025-26 has taken a fiscally prudent path, even though she has given the economy a big consumption boost while envisaging a decent capex outlay. The ₹1 lakh crore tax giveaway through a revised personal income tax rate structure will give lower-income households a much-deserved break. Indeed, the relief is significant in that those earning up to ₹12 lakh per annum will pay no income tax. With this, the new tax regime should attract many more taxpayers, as is the government's objective.

The sharply lower fiscal deficit target of 4.4% of gross domestic product (GDP) in 2025-26 from 4.8% in the current fiscal—the absolute amount is flat at ₹15.69 lakh crore—is likely to impart a negative fiscal impulse to the economy. However, it is easy to call for countercyclical approaches to revive growth but one cannot blame Sitharaman, because it is important in today's difficult environment to keep India's fiscal risk premia low. Since the FM intends to ensure that the Centre's borrowings, as a share of the GDP, stay on a declining trend, injecting a fiscal impulse is difficult. The new target for central government debt is 50% +/- 1% of GDP by FY31 from 57.1% in FY25. The central bank must support the government's efforts and stimulate demand for credit from businesses and individuals, and encourage private sector investments.