Salute the understated commitment to fiscal rectitude which enables a favourable macroeconomic environment

Consumer consumption is the mainstay of the Indian economy.

“You are the stormy petrel of crime, Watson,” Sherlock Holmes famously told his confidant in The Naval Treaty, one of Arthur Conan Doyle’s mysteries, conveying that Dr. John Watson’s arrival was often a precursor to an intriguing case.

As a forerunner to the Union Budget, the Economic Survey 2024-25 did convey a sense of things to come. The dominant theme of this year’s survey was an appeal to the government to deregulate, to unleash the entrepreneurial energies of India. In that sense, it was a throwback to Reaganomics, the eponymous policy style of the former US President who had once remarked that the nine most terrifying words in the English language are: “I’m from the government, and I’m here to help.”

President Reagan’s scathing wit aside, the Economic Survey did seem to convey that, having done the bulk of heavy lifting in capital expenditure, the government now wanted the private sector to invest, and for consumers to spend. Consumer consumption, of course, is the mainstay of the Indian economy, contributing almost 60 per cent of our GDP. Working in a company that deals with consumer consumption day in and day out, I can say that the trends in the last few quarters have been encouraging, and the income tax concessions announced by the Finance Minister will buoy the Indian consumption story. Equally important here is the government's continued allocation of funds to welfare schemes such as PM Kisan, Free Ration, and NREGA. These schemes play an important role in boosting consumption. A good monsoon, a strong rabi season this year, and the cash these schemes have been infusing have enabled the resurgence in rural demand we have seen recently.

NREGA is an interesting example. When launched by Dr. Manmohan Singh, the scheme had its share of naysayers but has proven to be an enduring way of providing employment. In a similar vein, could short-duration gig work create similar value in urban India? As a representative of a food delivery company, I can say that the role of delivery partner is often the first tryst of work in an organised sector for a youngster coming to a new city. Therefore, it was very heartening for me to hear the Honourable Finance Minister convey that platform gig workers bring dynamism to the urban landscape. I also laud her announcement for providing health insurance to gig workers. Having said that, the platforms would need some clarity on how this will work, because several platforms, including Swiggy, are already providing insurance cover for health, accidents, and life.

One more announcement in the budget that is of particular significance for urban India is the Global Capacity Centre (GCC) Framework for tier 2 and tier 3 cities. If implemented correctly, this could be a pleasant déjà vu because many of today’s tier 1 cities reached this status, buoyed by the IT and BPO revolution that we witnessed in the early part of this century. India today boasts almost 1,700 Global Capacity Centres, which are bringing in revenue of more than $100 billion. Many new cities can develop or be rejuvenated around such GCCs, and the government’s vision and promotion of these centres are already showing good results, with India reportedly being home to 40 per cent of all GCCs in the world.

Similarly, from my experience in working in the insurance sector, I can say the FDI limit increase is very important. Global case studies show that insurance investments are usually long-term and are often a key component in long-term developmental projects. As India continues its remarkable transformation of physical infrastructure, this policy change could be as critical for development as it is for financial protection.

With an allocation of ₹11.2 trillion,  the government sees the limits of its Neo-Keynesian role and wants the private sector to step in. Now, while there are a raft of schemes that have been announced to kick-start India’s manufacturing engines, a case here needs to be made for startups. With more than 150,000 recognised startups and almost 120 of them as unicorns — almost all of them having achieved this valuation in the last decade — I don’t think at any moment in history, in any country, such outstanding entrepreneurial talent has aligned to take their economies and nations forward, often taking on international companies with legacies of several decades behind them. It wouldn’t be out of place to say that startups are the commanding heights of 21st-century India, and it was great to see the Honourable Finance Minister recognising their contribution and allocating ₹10,000 crore for the startup fund.

I must admit that I have been a big admirer throughout of our Honourable Finance Minister. While she has done several things right in the impressive eight budgets she has presented thus far, one thing I feel she doesn't receive sufficient credit for is her ability to maintain fiscal discipline throughout. Post-Covid, she inherited somewhat of a poisoned chalice, as the Gross Fiscal Deficit (GFD) to Gross Domestic Product (GDP) ratio averaged around 7 per cent in the years after Covid, as the government took the lead in investment and expenditure. The fact that the GFD to GDP ratio for the ongoing fiscal is estimated to be 4.8 per cent, and is further expected to go down to 4.4 per cent in 2025-26 (with income tax and corporate tax collections expected to grow by 14 per cent and 8 per cent respectively, the target looks eminently achievable), is an outstanding achievement. In her quintessential understated style, the Finance Minister conveyed all this and much more with minimum fuss. At barely one hour and fourteen minutes, it was also her shortest ever speech, but as they say, brevity isn’t merely the soul of wit, it is the soul of everything, and the FM may have been pithy and precise, but her budget was most impactful.

Finally, my elder child, who is studying economics, asked me that recent economic history suggests that Keynesian government action and Hayek’s minimal regulation philosophy appear in alternation every few decades. With the tone of deregulation in the Economic Survey, and the government holding back on capital expenditure, and with all this talk of Ronald Reagan, are we seeing a change again? I am not a trained economist, but I do remember the famous rhetorical questions of Lord Keynes: “When the facts change, I change my mind. What do you do, sir?” The important thing for policymakers is to be nimble enough to respond to situations. The Finance Minister has responded to the economic situation exactly as warranted. It is up to us — the consumers and the private sector — to do our bit now.