Boosting Indian Economy

  Sansad TV   Mar 7, 2025  Add to Reading List

The Union Budget 2025-26 presents a visionary approach to stimulate India’s economic growth, aiming to position the country as a technologically advanced and inclusive economy. By targeting areas like infrastructure development, job creation, rural upliftment, and industrial growth, the budget seeks to enhance various sectors of the economy. Here’s how these provisions are set to fuel India’s economic progress:

How the Union Budget 2025-26 Will Propel the Indian Economy:

1. Tax Reforms to Encourage Consumption:

  • Income Tax Exemption has been raised to ₹12 lakh, easing the tax burden on the middle class and allowing for more disposable income.
  • Revised Tax Slabs: The highest income tax bracket is now set at ₹24 lakh, ensuring higher-income groups retain more of their earnings, which is likely to boost private consumption.
  • Increased consumption is expected to stimulate demand, benefiting sectors like FMCG, retail, and real estate. The higher demand will further lead to an increase in GST and other indirect tax revenues, driving overall economic activity.

2. Capital Expenditure for Economic Growth:

  • The government has earmarked ₹11.21 lakh crore for infrastructure development, representing 3.1% of India’s GDP. This is expected to significantly boost capital formation.
  • Public investments in sectors like transport, energy, and urban development will lead to multiplier effects, generating employment and driving economic activity. The improved infrastructure will lower production costs, enhancing the competitiveness of industries across sectors.

3. Attracting Foreign and Domestic Investments:

  • The Deep Tech Fund of Funds will support emerging startups, particularly those focused on next-generation technologies, promoting innovation and creating high-value jobs.
  • Foreign Direct Investment (FDI) in the insurance sector has been increased to 100%, enhancing financial stability and boosting India’s capital markets.
  • The modified UDAN scheme aims to improve connectivity to regional airports, promote tourism, and facilitate trade, especially in remote areas, thus fostering economic growth.
  • Through Public-Private Partnerships (PPP), the government is aiming to attract private sector investments in infrastructure, ensuring more efficient and scalable development.

4. Expanding the Blue Economy:

  • The government is focusing on the Blue Economy, with a dedicated ₹25,000 crore Maritime Development Fund. This will strengthen port infrastructure and shipbuilding, which can open up vast economic opportunities.
  • The expansion of coastal tourism and aquaculture could generate millions of new jobs, tapping into India’s vast marine resources, which are valued at approximately $24 trillion globally.

5. Agriculture Modernization:

  • The PM Dhan-Dhaanya Krishi Yojana aims to uplift 100 low-productivity agricultural districts, benefiting 1.7 crore farmers by enhancing irrigation and post-harvest storage infrastructure.
  • The ₹5 lakh loan limit under the Kisan Credit Card (KCC) will provide farmers with better access to credit, supporting agricultural growth.
  • The Six-Year Pulses Mission aims to reduce India’s dependence on imported pulses, thereby increasing domestic production and reducing import costs.

6. Uplifting Rural Economy:

  • The Kisan Credit Card (KCC) scheme will continue to benefit farmers, with a ₹5 lakh loan limit, ultimately raising rural incomes and boosting rural consumption—an essential driver of economic activity in rural areas.
  • A Makhana Board will be set up in Bihar to enhance the production, processing, and value addition of Makhana, generating rural employment and supporting income generation.
  • A comprehensive program for Fruits and Vegetables will optimize supply chains, improving market access for farmers and stabilizing prices, which will further uplift the rural economy.

7. Strengthening MSMEs and Manufacturing:

  • The National Manufacturing Mission aims to bolster India’s manufacturing sector, increasing its contribution to GDP and enhancing the Make in India initiative.
  • A ₹10,000 crore Fund of Funds will support innovative startups, creating jobs and fostering industrial diversification.
  • The government has allocated resources to provide ₹5 lakh credit facilities to 10 lakh micro enterprises, improving access to finance and enabling their growth.
  • The creation of industrial corridors will integrate MSMEs into global supply chains, enhancing India’s export potential.

8. Urban Development and Smart Cities:

  • The government has set up a ₹1 lakh crore Urban Challenge Fund to promote sustainable urban development. This includes initiatives for water and sanitation, creative redevelopment, and the transformation of cities into growth hubs.
  • Investments in affordable housing, transport, and sanitation will not only enhance the quality of life in urban areas but also improve urban productivity, supporting higher per capita output.

9. Export Promotion and Global Integration:

  • An Export Promotion Mission has been set up to coordinate policies and improve India’s competitiveness in global trade.
  • The budget will remove several tariff barriers, making it easier for Indian exports to compete in the global market.
  • BharatTradeNet will streamline trade documentation, reducing inefficiencies in the export process and further boosting global trade potential.

10. Investment in Human Capital:

  • The establishment of 50,000 Atal Tinkering Labs will equip students with essential digital and innovation skills, preparing them for Industry 4.0.
  • The expansion of medical education by 10,000 additional seats will help bridge India’s healthcare workforce gap.
  • AI-driven skilling initiatives will enhance workforce capabilities, preparing the Indian labor force for the needs of the rapidly evolving job market.

Challenges Facing the Indian Economy:

1. Global Supply Chain & Regulatory Challenges:

  • Supply chain disruptions and rising costs of raw materials continue to impact manufacturing, leading to slower exports and economic growth.
  • Regulatory complexity, along with bureaucratic delays and gaps in infrastructure, remains a challenge for businesses, hindering growth and investment.

2. Fiscal Deficit Management:

  • With a fiscal deficit projected at 4.4% of GDP, strict fiscal discipline is necessary. The ₹14.82 lakh crore in market borrowings could push up interest rates, crowding out private investment and leading to higher borrowing costs for businesses.

3. Employment and Skills Mismatch:

  • While 170 million jobs were created between 2016-2023, a significant skills gap exists due to the rapid shift toward Industry 4.0 technologies like AI, automation, and robotics.
  • Urban areas continue to face structural employment challenges, as the urban share of GDP has remained stagnant between 52-55% over the past two decades. Bridging the mismatch between labor supply and industry demand requires urgent reforms in education and skill training.

4. Climate Change and Sustainability:

  • Climate resilience investments remain insufficient despite growing risks. There’s a need for greater focus on carbon capture, sustainable agriculture, and green infrastructure, with stronger policy incentives to support the green transition.

5. MSME Competitiveness:

  • While MSMEs contribute significantly to exports, they lack the digital infrastructure needed to integrate into global value chains. Government schemes focus on credit, but digital transformation and access to global markets remain underdeveloped.

Way Forward:

1. Streamlined Regulatory Framework:

  • Establishing a High-Level Committee to review non-financial sector regulations will help eliminate bureaucratic hurdles, simplify compliance, and reduce the cost of doing business, ultimately fostering a more business-friendly environment.

2. Fiscal Prudence and Growth-Oriented Policies:

  • The government must focus on improving revenue mobilization through better GST compliance and direct tax reforms. Accelerating disinvestment and asset monetization targets will ease fiscal pressures.
  • Public-private partnerships in infrastructure projects will further improve efficiency while reducing the burden on public finances.

3. Encouraging Private Investment:

  • Targeted credit guarantees for private investments in high-growth sectors like electronics, renewable energy, and pharmaceuticals will boost domestic and foreign investment.

4. Employment and Skilling Reforms:

  • Aligning education programs with industry needs and addressing the skills mismatch will increase employability, especially in technology-driven sectors. Additionally, transport and housing subsidies for urban workers will promote labor mobility.

5. Sustainable Growth and Green Finance:

  • The government should scale up green finance by issuing sovereign green bonds and promoting carbon trading to fund sustainable projects. The focus should also be on integrating circular economy models into national policy for long-term sustainability.

6. Empowering MSMEs for Global Trade:

  • Digital transformation programs aimed at helping MSMEs adopt e-commerce platforms and integrate with global supply chains will enhance their competitive edge in the international market.
  • Further trade facilitation measures, including single-window clearance, will streamline export processes and boost global competitiveness for Indian businesses.

By focusing on these strategic measures, India can overcome its challenges, harness its growth potential, and move toward becoming a more resilient and competitive economy on the global stage.