I would rate this Budget one of the most delightfully lapped-up Budget in my recent memories! The middle-class taxpayer was found in fits of glee. It’s another matter that the person earning Rs 12 lakh saves a tidy amount of 83,200 per year and one who earns Rs 24 lakh saves a handsome Rs 1.14 lakh. Be that as it may – it’s a certainly a good idea to put money into the hands of countrymen through tax-savings and allow them to spend, if they do, consumption increases, GDP rises, if they save, investments and capital spending increases multiplying values to the economy.
I thought I’ll structure my thoughts on the following lines, a) The backgrounds this year, b) The key points in my view, for the Budget; c) How the Budget addresses these, if at all; and d) the financial prudence observed.
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a) The backgrounds this year: The Economic Survey correctly points out the three Risks to our economy from global impacts around: i) The disruptions in global shipping and consequent drop in the global supply chain pressure indices, and rising costs; ii) Risks of Inflation and price pressures, though softening was reported towards Q3; iii) Geo-political policy-uncertainty indices turning unfriendly and I can add one more which is risks of the onslaught of protective nationalism witnessed amongst some of our major trade-partners. The Budget proposals in fields of shipping and transportation and indirect taxes (on the “25% tariff-threat”) however do not seem to have ventured into the maze of diplomatic touch-points excepting for a few tariff-reductions-in-advance in items we import from the US like Harley Davidsons.
b) The key points and strategy: I think, its best to fix up a set of key thrusts for Budgets for say three to four years and a set of fungible priorities (eg. an election in Delhi or Bihar this time, or Maharashtra or Andhra that time and so on). I would say for example, we need i) World-class education and sports for our youngsters and reskilling of our current workforce; ii) World-class public-health and nutritional facilities and in the remotest districts of India (we are today 105/127 in the global hunger index). iii) Research and development facilities and our youngsters should be the first to come out with our own large-language model from Generative AI for example, not request another 10 months! The world never waits for anybody. We already allocated $1200m for augmenting compute power last year and just $60m in this budget for training. Deepseek claims they spent just $5.6m on their AI model R1. “ChatGPT”, “Llama” and “Gemini Advanced” are all very expensive though. iv) Clean energy for our manufacturing, logistics, agriculture and homes and v) we need world-class infrastructure to make these possible and for gainful asset-creating employment for our youngsters.
At each step, today’s and the next 22 Budgets must keep reminding policy implementers, and countrymen we need to be a $30trillion economy in 2047 (10 times of what we are today) with a per-capita of $18,000!
c) How I see the Budget addressing these issues: (i) The honourable minister spoke of good quality schools and increase in seats in medical colleges but I found in the Budget papers an overall allocation of Rs 1.28 lakh crore (no increases over last year just about 2.6% of the Total Budget). Not her fault, as all we could actually spend was just 90% last year! I’m sorry to have missed any impetus on sports, a crying need area, remember our results at the Paris Olympics last year! (ii) On Health the allocation is Rs 98,000 crore just about 2% of the Budget. We couldn’t spend even the Rs 89,000 crore last year’s allocation although the ‘most unkindest cut of them all’ were the eggs for children, cut from their mid-day meals. (iii) On IT and communication, an allocation of Rs 95,000 crore made this year against last year’s actual spending of Rs 1.16 lakh crore, a 20% cut. I thought this year the 6G and Cloud capacities both for telecom as well as AI applications would see an enhanced requirement! iv) Clean Energy: The Minister emphasised on energy security and the need for 100GW of nuclear energy by 2047 on PPP, of which five small modular reactors are proposed by 2033, recall our commitments to the COP21. An excellent step, allocating Rs 28,000 crore up 28% but sadly enough, true to our acts we could not spend even 89% of this amount though allocations were in place! v) I saw Infrastructure being spoken of and the Minister has indeed upped the Budgets by around 17% counting State grants. I’m totally nonplussed as to why we could not spend last year’s allocations though. Wise minds would attribute this to Elections I know, but that
was known?
d) Financial prudence: The restraint and prudence shown in the Budget is commendable. Borrowings are less both actuals last year and proposed in Budgets this year, lesser Interest costs last year and reduced fiscal deficits consistently over the last 3 years and the Minister has stuck to her targets. Kudos! I have however no idea why we fell short in collection of our budgeted revenue last year from corporation tax, customs and excise and CGST given that we did grow more than 6% constant prices!
One last point, our Debts at Centre Rs 152 lakh crore, add those to the States. Although the Centre’s position in a developing ambience seems reasonable, I’m distinctly worried about the significant number of States with debt-to-GSDPs exceeding 30%, when they display fiscal deficits in excess of 4% at State level which ideally should be balanced. However, our proposed transfers are 12% more than last year. That’s a caution!
And before I part, … Of Trump’s “25% tariff-threats”, Berty Wooster would have silently figured, “Unseen in the background, Fate was quietly slipping lead into the boxing-glove.”, seeing it as an opportunity hidden in every “round” of the game.
Another day!
(Binayak Datta is a
finance professional)
