The Union Budget faced the dual challenge of steering India’s economy through mounting domestic pressures while navigating an unpredictable global landscape.

Domestically, while India remains the fastest-growing G-20 economy, signs of strain are evident. Export receipts, totaling $814 billion (₹67 lakh crore) and comprising nearly a fifth of GDP, have grown at a modest 5 per cent, reflecting sluggish global demand.

Simultaneously, private consumption—the bedrock of India’s growth—is rising at a subdued 4 per cent, signalling weakening household demand.

Together, these trends are contributing to a moderation in overall economic growth.

Globally, the environment remains fraught with uncertainty. Persistent inflation, fuelled by unsustainable debt from the Covid era, continues to weigh on recovery.

Adding to the turbulence is the unpredictability of Donald Trump’s presidency, marked by protectionist policies and geopolitical tensions.

This threatens to dismantle the post-war economic order, potentially disrupting global trade, energy, and immigration — pillars that underpin India’s economic integration.

Against this volatile backdrop, the Union Budget needed to balance stimulating
domestic growth with shielding the economy from external shocks.

In response, the budget introduced bold measures to fortify India’s economic resilience. The Finance Minister’s most notable move targeted India’s strongest growth driver —middle-class consumption.

By eliminating income tax for individuals earning up to ₹1 lakh per month, the government forfeited ₹1 lakh crore in potential revenue. Yet, this is expected to significantly boost disposable incomes, sparking a multiplier effect that could reignite demand across sectors.

India’s middle class, comprising roughly one-third of the population, is projected by the World Economic Forum to account for 75 per cent of total consumption in the coming years.

With more purchasing power, this demographic is poised to drive demand for fast-moving consumer goods (FMCG) like groceries and big-ticket items such as automobiles and appliances. This surge could provide the momentum needed to reinvigorate India’s growth.

Complementary measures, including initiatives to boost agricultural productivity and incentivize MSME manufacturing, are expected to create further economic tailwinds. However, persistent challenges may temper growth in the near term. Stagnant employment and rising personal debt continue to suppress consumer confidence. While the budget addressed some of these issues, the broader opportunity lies in rekindling animal spirits of entrepreneurial energy by streamlining regulations and cutting bureaucratic red tape—a need emphasized in the recent Economic Survey.

An eagerly anticipated reform is the creation of an Indian equivalent of a Department of Government Efficiency (DOGE), aimed at reducing administrative bottlenecks and fostering a more dynamic business environment. Structural reforms like these, coupled with the budget’s focus on consumption and production, could unlock the next phase of India’s ascent, ensuring the country not only weathers global headwinds but thrives amid volatility.

• Rudra Chatterjee is MD of Luxmi Tea and chairman of Obeetee