It will take a clear fiscal strategy to pave our path to Viksit Bharat

India's economy will have to expand at a pace that would need sustainably large budget allocations for capital expenditure

- SUDIPTO MUNDLE

On February 1, 2025, India's finance minister Nirmala Sitharaman presented her record eighth budget in Parliament. Her budgets have usually been characterized by three signature features: transparency, fiscal prudence, and high capital expenditure (capex). However, in the 2024-25 and 2025-26 budgets, there is a visible tension between the latter two. Capex growth has been drastically cut to meet the committed fiscal consolidation targets.

Earlier, high capex could be combined with fiscal consolidation—reduction of the fiscal deficit (FD)—by cutting down on revenue (or current) expenditure. With revenue expenditure growth already pared to a minimum in earlier budgets, the FD reduction target could only be met by also cutting back capex growth. This, in turn, was reflected in a sharp reduction in economic growth, compromising the high-growth path required for Viksit Bharat—India becoming an advanced country by 2047.