Moneycontrol Pro Panorama | We expect too much from the Union Budget

Budget 2025

Dear Reader, 

Two days to the much-hyped Union Budget, India got a jolt from the newly elected US President Donald Trump, who has threatened a tariff war on the country. On January 28, Trump called India, China and Brazil  “tremendous tariff-makers” and vowed to put “America first”, implying higher tariffs for these countries.

The irony is that the Trump comment came a day after the US President spoke with Prime Minister Narendra Modi in a telephonic conversation.

Did they discuss tariffs? We don’t know.

Don't expect too much from the Budget

That said, India has bigger reasons to worry.

Truth be told, Budget days are too overhyped. Unlike the past when excise duty changes in the Budget were mega events of the year, these days indirect taxes are out of the Budget purview. And as this piece pointed out, Budgets do not change the stock market trend.

The fact is Budgets are no magic cure for the economy. While upbeat speeches can induce optimism, what matters is proper implementation.

Nor does merely throwing money at problems work. The country is dumping more and more money into sectors with no oversight on efficiency and execution. That is nothing but pouring in water into a leaking bucket.

Take agriculture, for example. As this piece shows, the government has been hiking the agriculture credit target for banks in every Union budget. Not surprisingly, bank lending to agriculture has galloped in the last few years—from an outstanding of Rs 13.3 lakh crore in FY21 to Rs 22.2 lakh crore in FY 24.

But the key question is: Does this translate into more efficiency in agriculture sector? Not really. The Economic Survey points out that despite this increase in credit, GVA in the agriculture sector grew at a slower pace due to erratic weather patterns and an uneven spatial distribution of the monsoon in 2023.

In other words, the increased funding is not necessarily resulting in higher efficiency or output.

Invest in infrastructure

If India needs to make a leap into the big league, it needs to invest more in infrastructure expansion. This has been said innumerable times, and we too had emphasised it here.

What we have isn’t good enough!

India’s 3.4 percent capex is commendable, but timid. To become a $10 trillion economy by 2035, it must prioritise infrastructure as China did—aggressively, strategically, and efficiently.

The alternative? Stagnant growth, lost demographic dividends, and a failure to compete in the AI and green-tech era. As Chanakya wrote in the Arthashastra: “The root of wealth is economic activity, and lack of it brings material distress.”

India’s wealth lies in its infrastructure—build it, and the economy will follow.  

The problem is not a lack of ambition but an entrenched culture of poor execution. India’s economic growth potential is being undermined by delays, inefficiencies, and bureaucratic inertia.

Unless the government shifts focus from mere announcements to ensuring actual delivery, Budget promises will continue to be hollow, and India will struggle to translate its policy vision into real-world impact.

They wage an AI war, we master 10-min food delivery

As the world’s superpowers invest in foundational technologies that promise to define the 21st century, India is perfecting 10-minute food delivery. Consumerism is ruling the roost.

This glaring contrast is more than a cause for embarrassment— it’s a call to re-examine the nation’s priorities. AI has become the centrepiece of global innovation. In the United States, companies like OpenAI and Google are advancing AI research with billions in funding.

Meanwhile, China is leveraging its state-backed strategy and vast data ecosystem to establish itself as the global leader in AI by 2030. Within days of launch, Deepseek has raised questions on the dominance of US firms like OpenAI.

India is just watching this from the gallery; we shouldn’t!

Let’s not miss the bus

Both the US and China understand the high stakes. AI is not merely a tool for convenience but a transformative force that will shape industries, solve critical challenges, and redefine global power structures. As this FT piece says, the impact of artificial intelligence on productivity could be epoch-making.

From developing life-saving healthcare solutions to driving quantum computing breakthroughs, the AI race is about who will set the rules for the next industrial revolution.

The irony is India has all the ingredients to compete. With its massive talent pool, burgeoning tech sector, and growing digital ecosystem, the country should be a key player in this race. Why are we not, then?

In his piece, Prosenjit Datta pinpoints why India is nowhere close to China in the AI race due to the pitiful R&D investments by our country. India’s R&D investment as a percentage of GDP stands at around 0.64 percent, compared to China’s 2.41 percent or the US’ 3.47 percent. The Indian private sector’s contribution to gross R&D expenditure is also a low 36.4 percent compared to China’s 77 percent and the US’ 75 percent,” Datta writes.

The painful fact is that India lacks leadership with a vision to become world leaders in technology. We like to follow, not lead -- at least in the AI race. 

What India needs is a DOGE!

What India urgently needs is not another Budget laden with empty slogans, but a Department of Government Efficiency (DOGE)—a ruthless, tech-driven enforcer to dismantle red tape and deliver results.

That department should track project execution, streamline bureaucratic approvals, and impose real-time accountability on ministries and agencies. Countries like Singapore and South Korea have successfully used similar models, integrating technology and performance-based governance to eliminate bottlenecks and inefficiencies.

In an earlier piece, Manas Chakravarty rightly argued that India has a case for DOGE saying despite all the promises of ‘’minimum government, maximum governance’’, total government expenditure in India, at 29.1 percent of GDP, is quite high among Asian nations.

In his piece, Chakravarty questioned why India has too many ministries citing experts who have said there is no particular reason why we need a textile minister, or a minister of civil aviation, or a minister for food processing, or a minister of information and broadcasting, among numerous others.

That argument makes sense. The case for consolidating ministries has been made many times. We could, for instance, have a single industry minister, one for all kinds of transport and logistics, one for all types of energy policy.

Let me sum up

For too long, India has mistaken policy announcements for progress. The obsession with the Union Budget as a singular economic event is a distraction from the real issue.

Without a systemic overhaul in execution, India will continue to be a nation of big plans and poor results.

Over to the “big day”!

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Dinesh Unnikrishnan Moneycontrol Pro