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The Indian government's FY26 budget, as articulated by Finance Secretary Tuhin Kanta Pandey, aims to provide a significant non-inflationary stimulus to bolster economic growth. This approach carefully balances the need for economic expansion with the imperative of maintaining macroeconomic stability and controlling inflation. The strategy, as presented, avoids overly aggressive stimulus measures that could potentially exacerbate inflationary pressures, a critical consideration given the global economic landscape. The budget's focus is on creating an environment conducive to both savings and investment, thereby fostering organic, sustainable growth rather than relying on short-term, potentially unsustainable boosts.
A key component of this strategy is the significant increase in the income tax rebate limit to ₹12 lakh. This move directly increases disposable income for a substantial segment of the population. The intention is to stimulate consumption and investment, thereby injecting fresh momentum into the economy. By placing more money in the hands of taxpayers, the government hopes to see increased spending fueling demand-side growth. Furthermore, the expectation is that a portion of this increased disposable income will be channeled into savings and investments, further bolstering long-term economic stability and growth. This targeted approach aims to avoid the pitfalls of excessive government spending that might otherwise lead to inflationary pressures.
The budget also demonstrates a commitment to fiscal consolidation. The projected fiscal deficit for FY26 is set at 4.4 percent of GDP, reflecting a responsible approach to managing government finances. This commitment to fiscal prudence demonstrates a strategic understanding of the need to balance economic stimulation with long-term financial health. The reduction in the FY25 fiscal deficit target by 10 basis points to 4.8 percent of GDP further underscores this commitment. This careful management of government finances is intended to maintain macroeconomic stability and to avoid actions that could trigger inflation. The strategy recognizes that responsible fiscal management is essential for sustained economic growth and stability.
Pandey's emphasis on addressing supply-side factors, particularly in the agricultural sector, highlights a multifaceted approach to economic growth. He acknowledges that merely stimulating demand is insufficient if supply-side constraints continue to impede economic progress. Food inflation, for instance, is directly linked to supply-chain inefficiencies. Addressing these structural issues is seen as critical to long-term price stability. By focusing on improving supply-chain efficiencies and addressing bottlenecks, the government aims to reduce inflation, thus benefiting industries and the middle class alike by reducing costs and interest rates. The success of this approach relies on a holistic strategy that tackles both demand and supply-side challenges.
The budget's balanced approach attempts to mitigate potential risks while promoting growth. The government understands the delicate balance between stimulating the economy and controlling inflation. By prioritizing a non-inflationary stimulus, it aims to achieve sustainable economic growth without triggering price increases that could negate the positive effects of the stimulus measures. The focus on both demand and supply-side initiatives, alongside a commitment to fiscal consolidation, demonstrates a comprehensive and considered strategy for managing the economy. The long-term success of this approach will depend on the effective implementation of these policies and the overall performance of the global and domestic economic climates.
Source: Budget gave non-inflationary stimulus to economy, will push growth: Finance Secy