As India prepares to unveil its Union Budget and monetary policy, policymakers face the daunting challenge of navigating a landscape marked by subdued urban consumption, hesitant private investment, and global economic uncertainties. Both fiscal and monetary measures must work in tandem to prioritise growth while maintaining fiscal prudence. The global environment remains volatile, with concerns such as a stronger dollar and trade tensions adding further pressure on emerging economies like India. While India has shown resilience in the past, it cannot afford to ignore the ripple effects of these external factors. The upcoming budget should not only focus on domestic issues but also anticipate global trends, ensuring that India remains competitive on the world stage. The budget must take bold steps to rationalise revenue expenditure.

Subsidies, particularly in areas like food distribution, need to be reassessed in light of changing consumption patterns. This would free up resources for more productive investments. For instance, infrastructure development, which has a high multiplier effect, requires better allocation and execution. Recent trends, showing underutilisation of allocated capital expenditure in sectors such as roads and defence, underscore the need for realistic targets and improved project monitoring. Setting ambitious goals without addressing bottlenecks only risks delays and inefficiencies. Furthermore, the successful implementation of any policy relies heavily on effective governance and transparent execution. Bureaucratic inefficiencies and delays in project approvals often derail even the most well intentioned initiatives. Strengthening institutional capacity to fast-track infrastructure projects and ensuring accountability at all levels will be a key to achieving the desired outcomes. Without a commitment to robust execution, even the best-laid plans may fall short of their potential. At the same time, the government must address the stagnation in urban consumption. Tax reforms, including relief measures for the middle class, can play a pivotal role in boosting demand.

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However, such reforms must strike a delicate balance. Revenue streams, especially from corporate taxes, are unlikely to see significant growth, and nominal GDP projections are lower than initially anticipated. To sustain fiscal discipline, any tax relief must be offset by bro a dening the tax base. With only a small fraction of the population filing income tax returns, the need for a more equitable and efficient tax system is clear. On the monetary front, the focus must shift from defending the currency to supporting growth. India’s flexible inflation targeting framework offers the Reserve Bank of India the opportunity to respond to domestic conditions. With food inflation showing signs of easing and core inflation remaining stable, there is room to adopt a more accommodative stance. Lowering interest rates and easing liquidity can provide the much-needed impetus to private investments and consumer spending. The broader fiscal framework also demands attention. While the government is on track to meet its fiscal deficit target this year, this achievement stems partly from underutilised capital expenditure rather than robust revenue growth. The medium-term fiscal strategy must ensure that debt levels remain sustainab