M Chuba Ao
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 Rs 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 & 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 Centers, 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)
.JPG)
