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The upcoming Union Budget 2025, Finance Minister Nirmala Sitharaman's first under the NDA 3.0 government, is anticipated to be growth-oriented, prioritizing manufacturing, consumption, and capital expenditure (capex). This expectation arises from India's projected 6.4% GDP growth in FY25, a figure that, while positive, necessitates substantial government intervention to stimulate lagging sectors like manufacturing. Industry leaders, including representatives from CII, EY India, Tata Chemicals, and Hero Enterprise, express a generally positive outlook, tempered by concerns about global uncertainty, high interest rates, and currency pressures. The consensus is that increased government spending would significantly boost business confidence and investment.
A key challenge for the Finance Minister is balancing the need for increased spending with the fiscal responsibility roadmap, aiming to reduce the fiscal deficit below 4.5% by FY26. This necessitates strategic allocation of resources. Discussions amongst industry experts highlight the interconnectedness of manufacturing and consumption. Boosting rural demand is seen as crucial for driving manufacturing growth, while acknowledging headwinds such as global uncertainty, high real interest rates, and currency fluctuations. Policy reforms aimed at improving the ease of doing business are considered essential for enhancing India's competitiveness in the global market, particularly against Southeast Asian and Chinese competitors. The calibrated approach of the Reserve Bank of India (RBI) in managing the exchange rate is viewed favorably, potentially supporting a reduction in domestic interest rates and promoting exports.
The role of government spending, particularly in infrastructure (both physical and digital), is emphasized as critical for stimulating the economy. Experts suggest leveraging divestment proceeds to establish a sovereign wealth fund, reduce debt, and further enhance infrastructure spending. Stimulating consumption, especially among lower-income earners, is proposed through the use of coupons or vouchers targeted at specific goods and services beneficial to both consumers and the economy. This targeted approach is believed to have a multiplier effect, promoting broader economic growth. A shift in focus from fiscal deficit targeting to debt targeting is advocated. This strategy is predicted to improve India's sovereign rating, attracting foreign direct investment (FDI) and lowering real interest rates.
Beyond infrastructure and consumption, increasing capital expenditure is considered vital for sustained growth. A significant increase (25% or more over the previous year) in capex allocation is recommended, along with a continuous commitment to this level of investment in subsequent years. Easing the burden of doing business, including simplifying tax procedures and decriminalization, is also highlighted as a crucial area for improvement. The creation of employment opportunities, particularly in manufacturing and services sectors, is deemed equally important. Finally, a greater emphasis on state-level growth is advocated, recognizing the crucial role states play in driving India's overall economic progress. These six key areas—fiscal management, consumption stimulation, capex increase, ease of doing business, employment generation, and state-level development—represent the core elements of the anticipated growth-oriented budget.
Source: Expect growth-oriented budget focusing on manufacturing, consumption, and capex: Experts