Govt redefines GDP,but will it be worth it going forward?

The government of India, which presented an interim Budget on the floor of the Parliament on Thursday, has redefined GDP (Gross domestic Product. With a new definition of GDP (Governance, Development and Performance) bearing a sharp focus on fiscal consolidation, the interim budget has demonstrated that the direction of the government is on long-term growth. The fiscal deficit to GDP at 5.1 per cent for FY25 along with outperformance in FY24 at 5.8 per cent versus 5.9 per cent target demonstrates the government’s commitment to not go the populist way, even in an election year. But at the same time, the focus on the four pillars of social governance-poor, women, youth and farmers- the government’s direction in Amrit Kaal is towards an inclusive growth that is sustainable and non-inflationary. The Capex growth estimated at 11.1 per cent is reasonable, on the face of it while market borrowing will be lower for FY25 versus FY24. In an era where the global world is struggling to rein in fiscal deficit and borrowing, as per Equirus, India adopting the path of consolidation and reduction in borrowing showcases its macro stability.

The FM has reiterated the glide path of below 4.5 per cent for FY26. As expected, there was no touch of populism – outcome versus outlay. The government's strong commitment to the welfare of the underprivileged, women, young people and farmers is essential to develop the country's human capital and maintaining stability overall. As regards the fiscal deficit, the government has clearly laid out the path for the next two years. The tax to GDP ratio has improved and gives the confidence to spend more. It is also a major contributor to the glide path for fiscal deficit. Secondly, the continued focus on infrastructure and affordable housing is a big positive. In fact, the Budget signifies a landmark commitment to fiscal discipline, highlighted by a projected GDP of 5.1 per cent. This stance is set to buoy the bond market and fortify banks' mark-to-market valuations. With Capex outlays increasing by 12 per cent to 11 lakh crore and sunset tax laws extended to March next year, the economic landscape gleams with promise.

The nation's support for EV manufacturing and infrastructure for charging them is expected to expand the availability of electric motorcycles in every corner of the nation. This is, as per Credit Wise Capital, expected to lay the foundation for a robust and environ-friendly transportation sector. This initiative not only addresses the immediate need for cleaner mobility but also stimulates economic growth by fostering job creation within the burgeoning EV industry that will also help give a boost to the demand for EV financing in the near future. Initiatives to address post-harvest distress in agriculture, rural development, and the rooftop solar scheme underscore a transformative journey towards inclusive growth and sustainability. To put it in a nutshell, the interim budget has a stamp of finality that this government is focused on growth-structural, sustainable and non-inflationary growth.