A Higher Bar In Fiscal Governance

Fiscal prudence is the rarest of rare commodities in politics. In the quest for voter appeasement, politicians in democracies have thrown the future of next generations under the bus with their profligacy and freebies in the biggest democracies from the U.S. to U.K. and Italy and from Tamil Nadu to Bihar and Punjab. That has purposely indebted future generations with their irresponsible acts.

Hence, the current government's decision to resist populist schemes and freebies in the Interim Budget, even as the nation prepares for General Elections in April-May, came as a huge surprise. Even more than that, the aggressive roadmap to contain fiscal deficit to 5.1% in FY25 and to 4.5% by FY26; lower borrowings leaving greater room for private sector borrowings; and an 11% higher capex on infrastructure were all music to the ears of economists, corporates and investors alike.

The Interim Budget has raised the bar in fiscal governance with a bundle of promises for the full Budget to take India's economy on a new trajectory. Responsible governance of the economy on those lines heightens expectations from the full Budget in July. Here's what the Interim Budget promises: a roadmap for Viksit Bharat by 2047 in the full Budget in July; three major economic railway corridor programmes; next-generation reforms; consensus building with states and stakeholders; programme for dairy farmers; aspirational district programme for states; new housing scheme for middle class; boost for digital public infrastructure; deeptech in sectors such as defence; measures to ensure Eastern region (Bihar, Jharkhand, Chhattisgarh, Odisha, and West Bengal) become engines of growth in the Amrit Kaal; regulatory environment to facilitate growth of MSMEs, among a few.

Critics point out that the real reason behind fiscal discipline is to make the Indian economy attractive for foreign investors and rating agencies on whose observations billions of dollars flow from one geography to another. They say, the government is now desperate for foreign investment since domestic private investment is slow to take off and barring Centre's capital expenditure-aided consumption, all other engines of the economy — exports, private investment and consumption are yet to join the party.

Even to a lay observer, those views would seem uncharitable. After all, this isn't the only time this government has exercised restraint. Notably, in Covid-hit years 2020 and 2021-2022, India was the only nation that avoided tax cuts and doling out cash to individuals and industry to trigger consumption which had come to a standstill. Instead, it created a new economic case study of reviving a sputtering economy through heavy capital expenditure on infrastructure building and at the same time taking care of subsistence living of the 80 crore poorest of the poor with free foodgrains — a strategy that continues to be in place till date.

That the capex-led growth has proved to be a gamechanger for India's economic future is now widely acknowledged as the reason why India's post-Covid recovery has been the sharpest while nations that gave out free cash continue to struggle.

This Budget Special issue thus carries a special package on India's ongoing infrastructure makeover with 10 of the most critical projects in the works and a tale of two airports in Navi Mumbai and Noida, which have been promised for two decades each but are only being delivered now. This Fortune India special issue takes you on a journey that will culminate with the sequel of the full Budget in July once the new government is sworn-in.