THE GROWTH DILEMMA

Inflation, rising unemployment and stagnant incomes continue to be matters of concern for a majority of Indians, fuelling scepticism about the long-term impact of the government's policies

- M.G. ARUN

India's post-Covid economic rebound has lost steam, weighed down by sluggish consumption, tepid private investment and an adverse global trade and geopolitical environment. Growth is projected to taper down to 6.4 per cent in FY25 from 8.2 per cent in FY24, according to government estimates. The Reserve Bank of India (RBI) forecasts it to only marginally rise to 6.7 per cent in FY26. Compounding these challenges are policy uncertainties posed by the new Donald Trump regime in the US, signalling a turbulent road ahead for the Indian economy.

Against this backdrop, Budget 2025 saw the Narendra Modi government unveil an unprecedented bonanza for the salaried class, which numbers around 32 million. The budget's income tax exemptions mean that individuals earning up to Rs 12 lakh annually will pay no income tax-a move aimed at boosting disposable income and stimulating urban consumption. While this alone may not be a game-changer for growth, higher spending is expected to spur private investment, creating a positive ripple effect on the economy. In any case, the government has sent a clear signal that its policies are geared toward addressing economic challenges and middle-class concerns-an approach that has found some resonance with the public.