The union budget came at the backdrop of subdued global growth, stagnant global trade, rising protectionism, and increasing inflationary pressures. However, the economic survey highlights strong foundation of the Indian Economy in these uncertain times. Hence it is critical to read the union budget in the light of achievements and areas of concerns for the economy in the past year. 

Current Economic Landscape – A Look at Few High Frequency Indicators  

• GDP Growth: India’s GDP is projected to grow at a rate of 6-6.5% in 2024-25, buoyed by domestic investment, higher consumption, improved agricultural performance, and an increase in merchandise and services exports. 

• Inflation: Retail inflation has been maintained at 5.4%, the lowest level since the pandemic, thanks to effective governmental and Reserve Bank of India (RBI) policies. It is anticipated to further decrease to 4.5% in 2024-25, assuming a normal monsoon and absence of external shocks. 

• Fiscal Health: The fiscal deficit has improved, decreasing from 6.4% of GDP in 2023-24 to an expected 4.5% in 2024-25, driven by robust tax revenues, enhanced non-tax revenues, and controlled revenue expenditure. 

• Monetary Policy: The RBI is likely to maintain a neutral monetary policy stance with stable interest rates, supporting ongoing economic stability. 

• Foreign Direct Investment (FDI): Net FDI inflows saw a decline from $42 billion in FY23 to $26.5 billion in FY24, with a slight moderation in gross FDI inflows, reflecting broader global economic trends. 

In such situation, to strengthen the bottom-up reforms, promote job creation with skill development, create a resilient agriculture sector, balance energy security with green transition, and further the innovation ecosystem in the country, the government has focused upon 9 key priority areas to support broad based and sustainable economic growth. Here is Intueri’s take on what Industry should be watchful of in the 9 high priority areas for government.   

1. Productivity and Resilience in Agriculture

Economic Resilience: India’s agricultural sector is pivotal for economic growth amid global uncertainties. Currently, the crop yield is half the global average. Investment in high-yield varieties can increase the production of maize, cotton, and rice 2, 3, and 8 times, respectively. Hence, significant support has been extended to Agri-marketing, logistics, research, and fertilizers.

Investment Opportunities: Focus on high-growth areas like organic farming, climate-resilient crops, agri-technology such as micro-irrigation, and drone fertilizers are the areas that will receive impetus from both the government and private sector.

Self-Sufficiency in Pulses and Oilseeds: Strengthening supply chains and local sourcing to reduce import dependency.

Digital Public Infrastructure (DPI): Utilizing DPI for better data management and precision farming.

Shrimp Production & Export: Expanding into new markets and promoting sustainable aquaculture.

2. Employment & Skilling

According to data mentioned in the Annual Survey of Industries quoted by Economic Survey, 23-24, the employment growth in companies with more than 100 employees has overtaken employment growth in companies with less than 100 employees. This means that the consolidation and formation of the manufacturing sector are higher for firms with a higher headcount. To ease the pressure on small firms to hire employees, the government has given the following benefits. Firms should focus on the following aspects to capitalize on the government’s support.

Employment Linked Incentive Schemes: Optimizing incentives to reduce labor costs and boost productivity.

Women in Workforce: Increasing gender diversity through hostels, creches, and targeted skill programs.

New Skilling Program: Emphasizing future-ready skills in technology and digital literacy.

3. Inclusive Human Resource Development and Social Justice

The balanced and inclusive development approach creates more regions of high growth and improves the quality of manpower for the private sector to employee. Firms should focus on the following aspects to capitalize on the government’s support

Saturation Approach for Social Development: Aligning CSR with government initiatives to enhance social inclusivity.

Purvodaya Plan: Investing in eastern India’s infrastructure, education, and industry to drive regional growth.

4. Manufacturing & Services

With 1 lakh MSMEs forming the backbone of the manufacturing industry, the support provided to them in the form of easing compliance, more credit support, increasing digitization and technological adoption, the sector is likely to pick up with rising index of industrial production.

MSME Support: Encouraging digital transformation and e-commerce integration for MSMEs.

Internships: Developing integration programs for interns to enhance their career growth.

Industrial Parks: Leveraging plug-and-play parks for operational efficiency.

Critical Mineral Mission: Investing in domestic production, recycling, and securing global supply chains for critical minerals.

5. Urban Development

Cities have been arteries of growth; along with the smart city missions, the transit-oriented development plans for the cities make them more attractive destinations for industries. Industries in transit infrastructure will, in particular, get more avenues for investment.

Cities as Growth Hubs: Expanding Global Capability Centers and sustainable urban development.

Transit-Oriented Development: Developing integrated transport systems and real estate around transit hubs to boost connectivity and industrial growth.

6. Energy Security and Energy Transition

The imperatives of balancing energy security with sustainable transition have required government not to go ahead with any drastic step in this domain. However, creation and consolidation of Indian carbon markets will create space for more green companies and will require hard-to-abate companies to spend money on buying emission credits.

Renewable Energy Investments: Promoting solar energy through initiatives like PM Surya Ghar Muft Bijli Yojana.

Advanced Energy Technologies: Partnerships for nuclear energy development and efficiency improvements in thermal power plants.

7. Infrastructure Support

With Rs. 11.1 lakh crore of capex, the government intends to crowd in private investments. The increasing government capex also shows improving quality of government expenditure. This will help all capital intensive and heavy industries as the logistic infrastructure in the country continues to improve. For ex- turn around time for the Indian ports have improved than some of the east Asian ports.

Capital Expenditure and Project Opportunities: Government’s fiscal support provides numerous opportunities for construction and infrastructure firms.

Rural and Flood Mitigation Infrastructure: Key projects like PM Gram Sadak Yojana and flood mitigation in flood-prone states.

Private Investment Encouragement: Viability gap funding and market-based financing frameworks open new avenues for private investments.

8. Innovation, Research and Development

With the patent registration by start-ups increasing by 17 times in the past decade, the innovation ecosystem in the country has strengthened itself a lot. To further consolidate it, government has focused on increasing R&D expenditure.

R&D Funding: The Anusandhan National Research Fund and a ₹1 lakh crore financing pool support corporate R&D efforts.

Space Economy Expansion: Venture capital fund to boost the space economy, presenting opportunities for aerospace and high-tech sectors.

9. Next Generation Reforms

As Economic Survey (2023-24) points out, future economic growth will not be driven by big-ticket economic reforms but incremental reforms in the governance of the country, the “nuts and bolts of government,” as CEA points out. The following reforms promised will go a long way in easing the regulatory landscape in the country and easing LIC (Licencing, Inspection and Compliance) Raj. Private sector entities will benefit from the ease of doing business brought by such reforms.

Regulatory and Economic Reforms: An Economic Policy Framework to guide long-term strategic alignment with government policies.

Land and Labor Reforms: Optimizing operations in real estate, manufacturing, and services through productivity improvements.

Collaboration and Competitive Federalism: Encouraging state-specific reforms and localized solutions for industry leaders.