The beginning of a new year is also the season of Budget
making. India's economic journey is in a buoyant mood.
It is generally expected by economic experts that India is
poised to benefit from global supply chain diversification away from China.
India's strategic position as a manufacturing hub could attract foreign direct
investments.
Some promising sectors include semiconductors, electronics,
and automotive components. It is also felt and rightly so that the targeted
industrial policies and sector-specific strategies will remain critical to
seizing these opportunities. Trade tensions, including a potential US-China
trade conflict, could disrupt supply chains and raise input costs.
But we know for a fact that President Donald Trump enjoys
good rapport with PM Naredra Modi hence economists expect the US to take a
calibrated approach towards India.
India’s pharmaceutical industry, a global leader in generics
and active pharmaceutical ingredients are well-positioned to capitalize on
supply chain shifts.
A recent survey conducted by the Confederation of Indian
Industry (CII) claimed that there is in the ultimate an optimistic outlook for
the Indian economy.
As high as 75 per cent of the companies believe that the
present environment is conducive to private investments.
This positive sentiment persists despite continuous
challenges posed by geopolitical uncertainties and disrupted supply chains.
With 70 per cent of firms planning to invest in financial year 2025-26, a rise
in private sector investments appears likely in the near future.
Studies are also revealing other facts. In FY25 and FY26, 42
per cent to 46 per cent of firms anticipate a 10 per cent to 20 per cent
increase in employment, while 31 per cent to 36 per cent expect up to a 10 per
cent rise. The manufacturing and services sectors are likely to see direct
employment growth of 15 per cent to 22.
In other sectors, in Budget 2025-26, the Central government
is expected to increase rural development allocations by 5-8% This would mean
allocation of INR 1.78 lakh crore for rural areas. For 2025-26, the focus will
be on key programs like MGNREGA, rural housing, and roads, with significant
hikes anticipated for housing and road projects.
Even MGNREGA may see a slight increase in allocations. There
are a few other areas which should get priorities. The financial inclusion will
be an area getting enough attention.
The government could look at incentivising the segment by
enabling priority sector lending status, which could eventually lead to lower
interest rates and higher funds.Riding
on the success of technology hubs, the government could look at incentivising
public-private partnerships and new investments into setting up of fintech
hubs.
Importantly from the northeastern region of India point of
view, we may take note that the Agri and processed food exports grew over 11%
to $17.77 billion in April-December 2024. India's exports of agricultural and
processed food products rose by more than 11% year-on-year to $17.77 billion
during April-December of the current financial year. Removing the restrictions
on rice shipments helped things further.
According to data compiled by the Directorate General of
Commercial Intelligence and Statistics (DGCIS), rice exports in the first nine
months of FY25 saw a sharp increase of over 19% to $8.72 billion compared to
$6.44 billion in the same period last fiscal.
Exporters now say that rice exports in the entire FY25 may see
an increase of 10% because of a robust global demand. These are some of the
healthy signs of India's economic conditions. Of course the fact of the matter
is Union Finance Minister Sitharaman will present the Budget for 2025-26 on
February 1, at a time when GDP growth has slowed to its lowest point in several
quarters.
The government is that way expected to focus on economic
recovery. It goes without stating that the industry stakeholders are waiting in
anticipation as there’s a question that is looming in everyone’s mind – Will
the Budget stimulate consumption, revive GDP growth, and offer tax relief to
the common man and salaried individuals?
This year, people expect further changes in both the new and
old regimes to put more money in their hands.
It is generally understood that the government will continue
to advance initiatives aimed at deepening financial inclusion and strengthening
payments infrastructure to ensure seamless access to financial services. The
same enthusiasm ought to be felt for the underbanked in rural areas. ATMs and
Financial Service Centres, as essential pillars of banking services, play a
critical role in bridging the digital payment divide between urban and rural
communities.
The country may also hope for broader policies that encourage
innovation in digital payments and foster stronger collaboration between
financial infrastructure companies and government programs.
(M Chuba Ao is BJP national vice president. Views are
personal)
