Can Politics Deliver Prosperity ? - Divyakirti Mishra

Yes, contrary to popular belief, good politics doesn't have to come at the expense of sound economics. The latest Budget is a testament to this, seamlessly blending political strategy with crazy economic planning. The eye-catching reduction in personal income tax rates and the sharp increase in exemption limits to ₹12 lacks (₹12.75 lakh for salaried individuals) might seem politically driven. Still, there's solid economic reasoning behind these moves. It’s a two-for-one deal. At first glance, reducing direct tax burdens for middle-income groups could be dismissed as a populist tactic. However, it's a strategic move designed to revive private consumption, which has been lagging, declining from 61.1% of GDP in 2020-21 to 60.3% in 2023-24. By increasing disposable income, the government aims to stimulate demand, thereby encouraging private investors to expand their capacities. Think of it as giving the economy a much-needed caffeine boost—quick, effective, and energizing for growth. Despite revenue receipts projected to grow by 9% (FY26 over FY25), slightly trailing nominal GDP growth, the government has maintained a strong commitment to fiscal discipline. With a fiscal deficit target of 4.4%, public expenditure growth is moderated to 5%, and capital expenditure remains steady at ₹11.2 lakh crore. This shift indicates a strategic move from government-led spending to creating an environment where private investments can flourish. After all, you can't run the economy on government steroids forever; sometimes, you need to let the private sector lift its weight. One of the most commendable initiatives in this Budget is the establishment of a high-level committee to streamline compliance inspections, and regulations, especially in the financial sector. To ensure the committee's recommendations are implemented effectively and promptly, it should operate under an empowered secretariat. Ideally, the finance minister should chair this committee, collaborating with reform-driven state leaders to reduce the "regulatory cholesterol" stifling business growth. Because let’s face it nobody likes paperwork that multiplies faster than your email spam folder. In a significant push for micro, small, and medium enterprises (MSMEs), the Budget proposes to more than double the investment and turnover thresholds, enabling more enterprises to benefit from government support. It's like upgrading from a scooter to a sports bike—the same rider, but with a lot more horsepower. ● For micro-enterprises, the investment threshold jumps to ₹2.5 crore from ₹1 crore, with the turnover limit increased to ₹10 crore. ● For small enterprises, the investment limit rises to ₹25 crore from ₹10 crore, and turnover to ₹100 crore from ₹50 crore. ● For medium enterprises, investment shoots up to ₹125 crore from ₹50 crore, and turnover to ₹500 crore from ₹250 crore. MSMEs will benefit from capital subsidies for tech upgrades, cheaper credit through credit guarantee schemes, and marketing assistance. The credit guarantee cover has also been enhanced to ₹10 crore, unlocking an additional ₹1.5 lakh crore in credit over the next five years. Targeted schemes for labor-intensive sectors like leather, toys, and food processing will further drive growth. In short, MSMEs are no longer the side characters of the economy—they're stepping into the spotlight as growth heroes. The Budget doesn't just cater to national interests; it also zooms in on regional development, with Bihar receiving special attention. Key initiatives include: ● A new greenfield airport to enhance connectivity (because who doesn't want smoother take-offs and landings?) ● A Makhana Board to boost the yield and export quality of this niche crop (finally, makhana gets the glow-up it deserves) ● A PLI scheme for destination management, focusing on sites linked to Gautam Buddha ● Support for the Western Kosi Canal to improve irrigation and agriculture ● A national institute for food technology, entrepreneurship, and management These projects are designed not just to stimulate Bihar's growth but also to create job opportunities in neighboring labor-surplus states. This, in turn, will help reduce migration pressures and integrate these regions more fully into India's economic narrative. The Budget's strategic moves aim to channel the potential of private entrepreneurs, and the ever-growing middle class, and increase household savings. This trio is designed to be the engine driving India's sustained economic growth. By focusing on these areas, the government is setting the stage to make the most of India's demographic dividend while the window of opportunity remains open. This Budget does more than tick political boxes. It lays down a roadmap for inclusive and sustainable economic development. It's a powerful demonstration that good politics and sound economics aren't mutually exclusive. In fact, when done right, they can complement and reinforce each other to create lasting growth and prosperity.