Budget 2024: Policy continuity and fiscal discipline amidst global headwinds will help India achieve its 2027 targets

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India's 2024 Interim Union Budget, amidst geopolitical, technological and climate disruptions and global economy headwinds, has sent two important signals to the outside world.

The budget demonstrates continuity in India's economic policy, prioritising long-term measures over short-term ones. Continuity leads to certainty, which is an important factor for global investors. Continuity provided by government policy is crucial when aiming for high economic growth as it allows people to plan their future investments with certainty.

The budget reinforced this by extending the due dates of several policies designed to promote domestic innovation and attract foreign investment. It also extended the sunset clause for tax benefits on infrastructure investments by foreign sovereign wealth funds (SWFs) and pension funds by a year. The budget also increased the duration for tax exemption for startups by a year, along with extending the deadline for several tax incentives for businesses operating in the International Financial Services Centre (IFSC). This will give startups, pension funds and SWFs additional time to contemplate their investment in infrastructure projects in India.

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Another positive indicator for India is the country's stringent fiscal discipline. Finance Minister Nirmala Sitharaman revised the fiscal deficit estimate for this year to 5.8 percent of GDP. The government is aiming to reduce it further to 5.1 percent in 2024–25 and 4.5 percent in 2025–26. Fiscal discipline can lead to a higher credit rating for India, which can translate into greater private sector funding opportunities. At a time when the Indian economy is on its way to achieving the $5 trillion GDP target, access to foreign capital for the private sector is crucial.

Most importantly, the government is attempting to reduce the fiscal deficit without lowering its capital spending. In line with announcements from the last decade, the budget continues its capital expenditure push. The 11 percent increase in infrastructure outlay to Rs11.11 lakh crore for FY25 is essential for India's transformation. Over the last ten years, continuous infrastructure investment has yielded benefits on multiple fronts, and the government's commitment to capital spending resonates with the broader development theme.

For India to achieve its long-term economic growth target, there must be continuous capital flow through investments. The increased capital outlay can also stimulate private sector investments, which is important when the private sector is taking a cautious pause.

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The government's focus on the poor, youth, farmers and women is another aspect of the budget that addresses the important issue of inclusivity. For instance, women's participation in the workforce is an important factor that can help India achieve its ambition to become a developed economy by 2047. The current percentage of female workforce participation is 24 percent. The government's strategy to improve women's income through self-help groups targets the root of the problem, and the announcement of expanding the 'Lakhpati Didi' scheme to Rs3 crores aims to address this problem. The government's focus on economic growth and social development is necessary for the country's sustainable economic progress, where people are wealthy and happy.

It was evident at this year's World Economic Forum that the spotlight is on India, where economic growth is set to continue, and the Indian economy is at a unique advantage when the world is facing disruptions on technological, geopolitical and climate fronts.

The writer is chairperson, PwC in India.

The thoughts and opinions shared here are of the author.