5 February 2025
The Economic Times
Op-eds
At its core, Budget 2025
continues Gol’s investment boost in the short term, strengthens manufacturing
competitiveness in the medium term, and sets the stage for India to become a developed
economy in the long run. The budget aims to achieve these objectives while
keeping the fiscal deficit within the 4.4% target, ensuring macroeconomic
stability. India’s public debt-GDP ratio stands at about 83%. With over 60% of
emerging economies and 40% of advanced economies nearing 100% debt-to-GDP
levels, these nations face significant interest payments, limited space for
development expenditure, and ‘higher-for-longer’ inflation.
Combined with the
geopolitical instability and capital outflows to advanced economies, these
countries face a high risk of slowdown and macroeconomic instability. India,
however, remains in a more comfortable position. Nirmala Sitharaman’s 6-year
fiscal roadmap reassures that the country is likely to maintain this stability.
This budget outlines a 7%
increase in spending compared to the current year, signalling Gol’s commitment
to growth through strategic investments. The short-term priority is to stimulate
consumption. The FM’s * aim is to unlock the potential for higher disposable incomes
for a large portion of the population
through a wholesale revision of I-T rates, enhanced credit flow to farmers,
urban street vendors, fishermen and women entrepreneurs, as well as a strong
package of measures to leverage the tourism sector.
A key growth driver and
employment generator over the medium term is the clean energy sector. Gol has
allocated 81k cr for the energy sector, a 31% increase from the current
financial year’s estimated expenditure. A significant portion of this is
earmarked for clean energy, with around one-third allocated to the PM Surya
Ghar Scheme.
The budget maintains a
sustained focus on clean energy manufacturing, supporting ecosystem development
through the National Manufacturing Mission, and adjustments to taxes on
batteries, solar modules and wind turbines. The electricity distribution sec.
tor also receives a reformist push with the announcement of an increase in the
borrowing limit for states, enabling access to 50-year interest-free loans from
Gol, if state governments undertake reforms.
This is a strategic step
to ensure long: term energy security and a smooth transition to cleaner energy
sources. Gol also announced plans to deploy five indigenously built small
nuclear reactors by 2033, and allocated 220k cr for R&D. This
forward-looking initiative is crucial for decarbonisation, as nuclear power
offers 24x7 generation with zero carbon emissions.
With improved safety
standards and advances in technology, such as the use of thorium instead of
uranium, nuclear energy, in conjunction with renewables, is a viable
alternative to coal.
There has been ongoing
debate about. whether India should prioritise manufacturing or services as its
primary growth driver. Given India’s success in electronics manufacturing and
the software sector, both industries have significant growth potential. Gol has
wisely pursued a balanced approach by announcing initiatives for both
manufacturing and services, including measures to support GCCs and the
manufacturing sector.
Incentives for capital
goods manufacturing are particularly noteworthy. India needs to start producing
machines that enable final-stage assembly in sectors such as pharmaceuticals,
clean energy and auto.
Two other long-term focus
areas in the budget are education and skilling. As highlighted by Economic
Survey, India’s demographic dividend offers a unique opportunity, with 65% of
its population under 35 years and a median age of 28. However, it’s essential
to align skill development initiatives with evolving labour market demands.
Gol has allocated 21.28
lakh cr for education, accounting for 2.5% of total expenditure. Initiatives
such as broadband connectivity for all government schools, collaboration
between skill councils, and establishment of centres of excellence for skilling
will help India make the most of its youthful workforce.
The budget’s emphasis on
boosting agriculture, unleashing entrepreneurship and manufacturing, increasing
exports and undertaking critical ~ reforms positions India well to navigate
global economic challenges, while paving the way for future balanced growth.
Budget 2025 sets a strong foundation for growth, innovation and resilience. The
writer is chairman-CEO, ReNew
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