India’s economic rebound:
- Finance Minister Nirmala Sitharaman asserts that India’s economy is undergoing a “speedy rebound” after a brief moderation in the second quarter of 2024-25.
- The Union Budget 2025-26 is designed to address the immediate challenges posed by global uncertainties while focusing on spurring growth and private sector investments.
Relevance :GS 3( Indian Economy)
Economic growth performance:
- India has experienced an average growth rate of 8% in the three years prior to 2024-25.
- Only two of the last 12 quarters saw growth rates below 5.4%, highlighting the resilience of the economy.
- Sitharaman stresses that India will remain the fastest growing major economy, with strong foundations supporting the ongoing rebound.
Focus on rural demand:
- Private Final Consumption Expenditure (PFCE) is projected to grow by 7.3% in 2024-25, with rural demand playing a significant role.
- PFCE is expected to account for 61.8% of nominal GDP, marking the highest level since 2002-03.
Global economic uncertainties:
- Sitharaman acknowledges the impact of global issues like persistent conflicts, stagnation in global GDP, and inflation in emerging markets on India’s economy.
- These global uncertainties are influencing India’s budget, but the government aims to balance national priorities with fiscal responsibility.
Capital expenditure:
- Responding to concerns about capital expenditure, Sitharaman clarifies that capital expenditure outlays have actually increased, not decreased.
- The effective capital expenditure for 2025-26 is pegged at 4.3% of GDP, slightly lower than the fiscal deficit of 4.4% of GDP.
- The government is prioritizing capital expenditure over revenue or other commitments, with borrowed funds being directed towards creating capital assets rather than covering routine expenses.
Government’s fiscal strategy:
- Sitharaman emphasizes that nearly all borrowed resources are being used for financing capital expenditure, indicating the government’s focus on long-term investments to boost economic growth.
