A pro-growth Union Budget 2025-26 marked by coherence and consistency

The Budget represents a continuation and an acceleration of the government's multi-pronged economic development strategy

In the shortest Budget presentation speech of her tenure, Finance Minister Nirmala Sitharaman must be given full credit for coherence and consistency.

 

The Budget for 2025-26 represents a continuation and an acceleration of the  government’s multi-pronged economic development strategy. On the one hand, it wants to boost domestic consumption by releasing more purchasing power from the middle class through an easing of the taxation burden. On the other, it aims to contribute to that goal with measures in favour of women, farmers and the youth which should, hopefully, create a more inclusive prosperity – thus responding to the popular frustrations reflected in the results of the last elections.

 

 

This targeted improvement of the domestic side of growth potential is crucial and to some extent a prerequisite for enhancing India’s image as a destination of choice for foreign investment and for boosting the export potential of the country with the end result of generating the innovation and technology-driven sustainable high growth that will make India a developed country (Viksit Bharat) by 2047.

 

There is coherence and consistency regarding the sectors first in line for developing the country’s manufacturing capacity, i.e. semiconductors, electronics and mobile phones, EV batter–ies, AI, cleantech. The same can be said about the emphasis maintained on the support for startups with the creation of a Fund of Funds for them.

 

The Finance Minister pushed for improving the Ease of Doing Business in India through a lightening of the still very heavy regulatory burden. Increasing the limit for FDI in the insurance sector from 74 per cent to a full 100 per cent for companies covering the entire premium, the creation of an Export Promotion Mission with an allocation of  Rs 2,250 crore (about $350 million) to enhance India’s export competitiveness are measures sought by foreign as well as domestic investors. They are also in line with the Economic Survey presented by the Finance Minister.

 

All these measures go towards the goal of integrating India much more closely in reshaped global supply chains. And this goal has to be an integral element in achieving “Viksit Bharat”. There is, however, one important point to be made: Almost every MNC in the world is now talking of a “China + 1” strategy, and there is no shortage of countries, starting with Vietnam, Mexico or Indonesia wanting to be a major player in the “+1” proposition. In addition, the manufacturing and technological prowess along with the absolute supremacy of China when it comes to supply chain efficiency, will not diminish in the foreseeable future.

 

So, for all the assets it can rightfully claim and for all the substantial progress achieved so far, India is -and will be - facing very fierce competition in a global economic and geopolitical context.

 

While the 2025-26 Budget has a lot to be commended for, what will be crucial at the end of the day is speed and efficiency of implementation of the measures announced. This covers the further infrastructure development envisioned in the Budget involving the private sector through PPP schemes or the actions to strengthen and expand the micro, small and medium-sized enterprises (MSMEs) sector, an indispensable component of an efficient, full-fledged industrial supply chain.

 

A good Budget can do a lot, but cannot do everything when it comes to addressing some challenges that the industrial sector is facing, such as high input costs, high skills availability, digital adoption in some industry sectors, access to finance for SMEs etc. This is where corporate India has to step in even more to complement government policies, contributing much more to the R&D effort, creating more innovation synergies with startups and academic centres of excellence, developing upskilling schemes of its own, accelerating digitisation. There are some good success stories in the world in that domain to get some useful clues from.

 

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The writer is the  chairman of Smadja & Smadja Strategic Advisory Inc, Switzerland