Swaminathan Aiyar, Consulting Editor, ET Now, however, cautioned against viewing the Union Budget as a powerful lever that can single-handedly engineer growth or determine which sectors will outperform.
“Let me be clear that I am not among those who think that the budget is such a huge weapon that by tweaking this and tweaking that, I can change the rate of growth and I can decide which sector is going to boom and which is not. I do not believe the budget is a strong enough instrument to do all that,” Aiyar said.
He pointed out that India’s current strong macro position—characterised by robust growth and low inflation—has not been driven by short-term budgetary adjustments, but by years of structural reforms.
“If we have arrived at this Goldilocks economy, this wonderful situation of 8% growth and less than 2% inflation, it was not brought about by some little fiddle in the budget. This is a consequence of reforms at various different levels moving forward, strengthening the economy and increasing productivity,” he noted.
While acknowledging that the growth target is ambitious, Aiyar highlighted that India remains exposed to global economic conditions, given the country’s dependence on trade.
“When you look at all the possible problems going on in the rest of the world, when you see the IMF and World Bank saying the whole world is going to slow down, and India is a country where the total of imports and exports is like 40% of GDP, we are dependent on the rest of the world to a significant extent. We are not insulated from what is going on, and things are going to slow down,” he said.Despite these risks, Aiyar expressed confidence in India’s resilience, citing consistent outperformance.
“We have consistently been exceeding expectations quarter after quarter. So, there is something fundamental about all the reforms that have been taking place in the last 10–15 years that has strengthened us so that even in difficult conditions we have been doing better,” he said, adding that the 6.8% to 7.2% growth range is achievable unless there is a major global shock.
On what the upcoming budget should prioritise, Aiyar argued for restraint and a continued focus on fiscal consolidation rather than new stimulus measures.
“As far as what the budget should do, do not try anything exciting. You need to continue on the path of fiscal consolidation. If the fiscal deficit comes down to 4.2, please remember that when the fiscal deficit keeps coming down, that is not a stimulus. It is consolidation, in some sense anti-stimulus,” he said.
He warned against expanding subsidies or aggressively extending Production-Linked Incentive (PLI) schemes.
“We should not be trying various things like huge additional subsidies for that sector or extending PLI to another five sectors. I do not think we should be going in those kinds of directions,” he added.
Instead, Aiyar stressed that cutting red tape and deregulation should remain a priority, citing data that underscores the scale of compliance burdens.
“Last year, Nirmala Sitharaman set up a commission to look into deregulation. From all the reports, a very large number of regulations sector by sector have gone. But even then, you had this TeamLease report showing that for a standalone solar park you needed 2,735 compliances per year. You have to ask, what is this bewildering amount of red tape? So cut, cut, cut, cut, cut,” he said.
He urged the finance minister to deepen efforts in this area while avoiding excessive reliance on subsidies.
“Beyond that, please do not be adventurous in trying to open new areas for PLI or increasing PLI subsidies too much. Whatever is happening right now is already enough. We have got 8% growth in the first half. It is such a good performance that let us not pretend that by giving more subsidies you can accelerate anything significantly,” Aiyar concluded.