Budget: It must aim to engineer India's economic transformation

The target of Viksit Bharat by 2047 requires the budget to balance immediate challenges with long-term development goals

- Prachi Mishra

While annual budgets are routine affairs in advanced economies, they hold special significance in emerging markets, particularly in India. This colonial-era legacy has evolved from a mere accounting exercise to become a crucial platform for articulating the government's economic vision. As India approaches its budget for fiscal 2025-26, the stakes are particularly high, given the complex global and domestic challenges at hand.

The international landscape presents multiple challenges. Ongoing geopolitical tensions from the Russia-Ukraine conflict, West Asian developments, recent US election outcomes and China's domestic issues all contribute to global economic uncertainty. These external factors can significantly influence India's economic planning and policy decisions.

At the same time, India's domestic economy faces several pressing issues. Economic growth has shown concerning signs, with the second quarter of 2024-25 recording a seven-quarter low of 5.4%. This slowdown prompted the Reserve Bank of India (RBI) to reduce its 2024-25 growth forecast downward by 60 basis points to 6.6%. Simultaneously, persistent inflationary pressures, particularly in food categories, have led to an upward revision of its inflation projection by 90 basis points to 4.8%. The situation is further complicated by the rupee's depreciation to historic lows, substantial equity market outflows and volatile oil markets. RBI's recent adjustments to CRR (cash reserve ratio) requirements reflect its efforts to manage tightening liquidity conditions.