The Union Finance Minister’s record-equaling budget, under the historic third consecutive government led by Modi, is a testament to the government’s commitment to fiscal discipline and macroeconomic stability, even in the face of political challenges. Despite expectations that the government might loosen its purse strings following the BJP’s failure to secure a majority in the 2024 Lok Sabha election, the budget reflects a choice to prioritize long-term economic health over short-term populism.
This approach is evident in the budget’s focus on key areas such as agriculture, rural economy, employment, middle-class consumption, and the MSME sector, all while maintaining a close watch on the fiscal deficit. Though some in the market and industry may have been surprised by the unexpected tax proposal related to capital gains, this budget represents another solid, transformative step in the government’s decade-long journey towards a prosperous India.
The budget’s allocation of ₹1.52 trillion towards various initiatives is both ambitious and forward-looking. The promotion of natural farming, the establishment of 10,000 bio-input resource centers, the introduction of high-yielding and climate-resilient crop varieties, and the digitization of farmers’ land records are all part of a broader strategy to achieve self-reliance in critical areas such as pulses and oilseeds. These initiatives, though ambitious, are achievable and could have a significant multiplier effect on the GDP, particularly in a country where agriculture and the rural economy play a crucial role in overall progress and employment.
The increased focus on agriculture and rural development is particularly promising for agrochemical producers. The budget’s emphasis on digital public infrastructure, enhanced crop protection measures, and strengthening supply chains through farmer-producer organisations, cooperatives, and startups will likely boost demand for agrochemicals and fertilisers. As India has one of the lowest per capita usage of crop protection chemicals among major economies, this shift could mark a significant opportunity for growth in this sector.
The budget also prioritises the MSME sector, which is a cornerstone of India’s economic growth and employment generation. The government’s provisions for collateral-free loans for plant and machinery purchases, the reduction of the threshold for trading MSME receivables on the TReDS platform, and the push for PSU banks to develop in-house credit assessment capabilities all signal a strong commitment to supporting this vital sector. By making credit more accessible and affordable, the government is laying the groundwork for MSMEs to thrive, boosting the broader economy.
Employment, another key focus area of the budget, sees a substantial allocation of ₹2 trillion over five years for job creation and skill development schemes. This investment will likely address chronic unemployment issues while simultaneously providing the MSME sector with skilled and affordable labour. The resulting increase in employment could further stimulate economic growth and reduce rural poverty.
The budget’s emphasis on research and development (R&D) is also noteworthy. The proposed ₹1 trillion fund for private sector-driven R&D could catalyse a quantum leap in R&D, positioning India as a global leader in innovation and technological advancement.
Overall, the government’s ability to maintain over 7 per cent real GDP growth amidst global geopolitical turbulence is a testament to the success of its policies and the resilience of the Indian economy. This budget is poised to further that journey, though challenges remain. Effective execution of these ambitious initiatives will be crucial, particularly in the current geopolitical and domestic political environment.
Despite the government’s efforts to increase the share of manufacturing and capitalise on the “China plus one” strategy, the agrochemical industry continues to face challenges, particularly from Chinese dumping in both global and domestic markets. While the industry does not seek protection, it does require a level playing field, which the government can provide through enhanced support, infrastructure, and ease of doing business.
There are also concerns about the potential misuse of liberal Free Trade Agreement (FTA) provisions with ASEAN countries, which could negatively impact the Indian agrochemical industry. The amendment to customs laws allowing certificates of origin as valid proof for claiming customs duty benefits under Preferential Trade Agreements could open the floodgates to cheap Chinese imports via FTA partner countries. Such concessions should be coupled with stringent quality control measures and value-addition verification to protect domestic industries.
Finally, while the budget’s proposal to overhaul customs rates within six months is a step in the right direction, the industry’s long-pending demands for SEZ law changes and an extension of RODTEP benefits remain unaddressed. Additionally, a specific Production Linked Incentive (PLI) scheme for the chemical and agrochemical sectors, dominated by MSMEs, is a missed opportunity that the government may need to revisit.
In conclusion, the budget lays a strong foundation for sustained economic growth, focusing on agriculture, MSMEs, employment, and innovation. However, the successful implementation of these initiatives and addressing the concerns of key industries will be crucial to realising the government’s vision for a prosperous India in the years to come.
The author is Co-Chair, Gujarat State Council
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