Target 2029

IN PRE-REFORM BUDGETS the minutiae of custom and other duty structures would hold clues not unlike how group photographs of communist bosses in the Soviet era helped decode promotions, demotions and even a dramatic fall from grace. The 1991 ‘liberalisa­tion’ Budget was path-breaking for its pivot towards de-licensing but the salience of duties and exemptions remained. Just how a tweak would help certain busi­ness interests was a Budget-day mystery that needed solving. As Budgets became more transparent as the role of government in controlling economic activity decreased, some finance min­isters found other routes to massage numbers by keeping in­convenient borrowings off the book. Since he became prime minister, Narendra Modi has raised balancing the Budget and making data credible to the level of a fetish, reflecting his core commitment to transparency.

Speaking at Open House, a Budget discussion organised by Open after the proposals were placed before Parliament, Finance Minister Nirmala Sitharaman said while all governments bor­row, what they do with the money is crucial. Do they spend in a manner that creates inter-generational debt burdens? Will successive generations bear the burden of current profligacy? Or will money be spent on building assets that justify and perhaps even help service debt? The fiscal deficit has been set at 4.4 per cent of GDP for fiscal 2025-26 and the proposed spending on capex is 4.3 per cent of GDP, almost a matching figure, she said. Borrowing is intended to generate assets and not meet expenses for salaries or servicing of loans. In the past, Sitharaman has defended the Centre’s decision to levy cesses, arguing expenses must be covered. Some states have protested that cesses are not shared but then it is the Centre that foots the bill for extraor­dinary expenses as those incurred during and after the Covid pandemic. Borrow if you must, but the Budget numbers must not be fudged, is the prime minister’s directive, the finance min­ister explained. The commitment to honest accounting resulted in a Budget that gives away `1 lakh crore in tax revenue but does not balloon the debt.

THE FISCAL BALANCING act, subject to considerable analysis, spells out Modi 3.0’s political priorities which, with the benefit of time, reveal a broad roadmap to the Bharatiya Janata Party’s (BJP) campaign in 2029. The Budget bold­ly outlines a constituency that has largely backed Modi since 2014. Middle-class homes greeted his nomination as BJP’s prime ministerial candidate in 2013 with anticipation and hope, with the ‘Gujarat model’ attracting attention for being transparent in governance, pro-business and de-regulatory. Modi’s slogan “Max­imum governance, minimum government” struck a chord with middle-class professionals tired of the corruption and venality that came to mark the Congress-led coali­tion in office since 2004. It was not that the middle class was a consolidated segment. Many in this cohort held views critical of BJP’s advocacy of Hindutva and were deeply influenced by a cultural viewpoint that equates modernity with rejection of Hindu identity. The Modi government’s two tenures have moved the balance more to the right though the segment critical of BJP is vocal and assertive. The diffused nature of the middle class, often accused of being lethargic about voting, might become less so in the wake of the Budget’s focused outreach. The recognition of the middle class for its espousal of Calvinist values of thrift and hard work is intended to get this section to view BJP as the party of choice. The preference for Modi has seen Congress leader Rahul Gandhi berate the middle class for fol­lowing the prime minister as they would the Pied Piper. While the supposition is rather sweeping, there is some truth in it just as Congress has struggled to regain the trust of the white-collar educated voter suspicious of the party’s rediscovery of caste as an instrument of redistribution.

The Modi government’s post-Covid Budgets relied on upping the Centre’s spending on capital expenditure, recognising that uncertainties in the economy will make industry wary of fresh investment. The decision to step up government spending on in­frastructure was intended to generate a multiplier effect whereby a rupee spent will deliver close to three times in terms of mon­etary returns. The decision worked as the government did the heavy lifting. The problem is that the effects or tangible benefits by way of improved wages or better public amenities take time to manifest and the government was working within the confines of a limited fiscal space. Money given through revenue expendi­ture would deliver less for the bang and a choice had to be made. A big jump in the exemption limit for income tax and a rejig of all slabs that will place substantial sums in the hands of individuals and households could deliver a consumption boost the econo­my clearly needs. Fast Moving Consumer Goods (FMCG) major Hindustan Unilever (HUL) recorded a 2 per cent growth in Q3 of 2024-25 ending December 31, evidence of a decline in discretion­ary spending and overall conservatism. The last Budget’s capex target was not met and though disruption due to elections was a major reason, the limits of the strategy became more evident. The Budget shifts the focus to spurring higher consumer spending to create demand after recent Budgets emphasised supply-side initiatives. The politics of the bold switch-hit are a message to the middle class that the government sees it as a partner in India’s development and a population set deserving recognition for its sacrifices. The tax break and higher capex could not go hand in hand—and so while there is an increase in the capital expendi­ture allocation—the bet is on consumer spending. Modi used his reply to the discussion on the President’s Address to emphasise the point to the Op­position when he said “This just our third term…,” while pledging to work for a devel­oped India in years to come.

The disgruntlement in the chattering classes has been evident for a while. Every Budget is typically followed by memes of the middle class being short-changed and while this can be exaggerated and self-serving, there was a rising sense of bitterness fuelled by heightened inflation and substandard civ­ic amenities in many cities. The competitive populism that has seen BJP matching rivals in offering schemes that are more direct pay­outs is considered necessary for helping the less well-off and a political compulsion. But it also strengthened the view that the taxpay­ing class was the mug in the game. It burnt at both ends, coughing up a high percentage of income as tax and simultaneously paying more for education, health, transport, and food. It was time to address the growing anger and despair and Modi’s response took his party and the Opposition by surprise. A senior BJP MP pointed out that attempting to anticipate the prime minister’s next move is almost next-to-impossible. Raising the exemption limit to `12 lakh per annum is intended to err on the side of generosity and avoid half measures.

“The Budget does a good job of ensuring fiscal discipline and encouraging consumption. This should create demand and encourage investment,” former NITI Aayog chairperson Amitabh Kant told Open. Modi summed up in his post-Budget comments, saying that unlike most revenue-driven budgetary exercises, the government has sought to put money into the pockets of people. In the previous NDA government, Finance Minister Jaswant Singh’s promise to put more money in the “hands of housewives” was animated by a similar purpose. The Vajpayee government had done a good job of nurturing the economy and the idea was attractive. It did not fly due to a lack of ambition and complacency in BJP ranks. The rank and file felt BJP was a shoo-in for the 2004 election and forgot the first principle of winning—ensuring supporters turn out on voting day. Low cost of bank loans saw lakhs of salaried households realise the dream of owning a house. Yet BJP lost in most cities.

The government, building on its initiatives presented in last year’s Budget, has not lost sight of sections that require attention and are politically significant. Here, the scheme to encourage Dalit and tribal women first-time entrepreneurs stands out as it marries monetary assistance with self-reliance. The target of five lakh beneficiaries who can access loans of up to `2 crore, if prop­erly designed and publicised, can open avenues for women who work hard to boost family incomes. The opportunities in rural India are significant as Dalit and tribal households own land and are cultivators too, providing the base for additional livelihoods such as apiculture, forestry, horticulture, and vegetable and fruit cultivation. Successful self-help groups (SHGs) provide cause for optimism as long as the Centre enthuses the states to participate in implementing schemes. The Vishwakarma scheme meant to help artisans, a large number of whom are from the Other Backward Classes (OBCs), has been rolled out and close to 27 lakh beneficiaries registered at the end of January. The segment-wise targeting can be expected to continue as BJP looks to consolidate support among OBCs and overcome the hesitation of sections of Dalits and tribals about its Hindutva agenda.

The sentiment in favour of a tax cut was matched by calls for a fresh effort to push reforms, outlined by the economic survey’s focus on faster deregulation. The view that a certain bureau­cratisation has crept back into government functioning has been taken note of but the one-year timeline for a committee to examine all non-financial sector regulations, certifications, licences and permissions could, some commentators feel, have been shorter with a more focused mandate. The objective to strengthen ‘trust-based economic governance’ and enhance ‘ease of doing business’ especially in matters of inspections and compliances, is encouraging but the process need not await the submission of the full report. A thorough re-evaluation of gov­ernment services and individual and business compliances will put India’s structural reforms on a sounder footing and move it further along the path to being a modern economy that aspires to be the third largest in the world. As of now, both the quality of government services and transparency and regulation of busi­nesses require improvements.

After assuming office at the Centre, Modi began conducting rolling reviews of stuck and delayed projects and grievances related to ministries as part of PRAGATI (Pro-Active Governance and Timely Implementation). The exercise delivered in speed­ing up inter-ministerial coordination and resolving disputes with the assistance of states. The dozens of decisions embed­ded in the Budget which aim to nudge growth in sectors span­ning electronics, agriculture, science, innovation and finance require Central ministries to work faster and better. This in turn demands close monitoring and—as an official put it—crack­ing of the whip by the Prime Minister’s Office (PMO). Several states have BJP in office but may yet need pushing and prodding to ensure that the urgency of the task outlined by the Budget’s political statement is understood and implemented.

electionsFinance Minister Nirmala SitharamanIndian politicsNarendra ModiOpenomics 2025Union Budget 2025