The coming budget should present an opportunity for the Narendra Modi government to unequivocally convey that India’s growth story is intact and the country remains a compelling place for investors, both domestic and global, to put their money.
Jan 25, 2025 07:50 IST First published on: Jan 25, 2025 at 07:50 IST
Hindustan Unilever has posted a 1.8 per cent year-on-year sales revenue growth in October-December 2024. That makes it a sixth consecutive quarter (from July-September 2023) of sub-4 per cent topline growth for the fast-moving consumer goods bellwether. Moreover, volume growth has been flat with “downtrading” or sales of small packs outgrowing large packs. UltraTech Cement’s domestic sales volume grew 10 per cent annually during the last quarter, but revenues were up by just 2.9 per cent, reflective of pressures from a demand slowdown. HDFC Bank’s gross bad loans have risen by 16.1 per cent, and from 1.26 per cent to 1.42 per cent of its total outstanding advances, in the last one year. The not-so-impressive results of India’s largest consumer goods seller, cement maker and private lender tell a story of a struggling economy.
This is the sobering context against which the Union Budget for 2025-26 would be presented next week. US President Donald Trump’s threats of import tariff hikes, visa crackdowns and other immigration-related actions, in addition to capital outflows from a strong dollar and rising treasury yields, may be immediate sources of worry. But the rupee has stabilised somewhat since mid-January — actually strengthened to 86.2-to-the-dollar, from all-time-lows of 86.7 — and the dollar index, too, has fallen from 110 to just over 107 levels. The Trump factor could well settle into an equilibrium, with the world and India learning to deal with it. The real worry isn’t external, but internal to India: Has its long-term growth story — which was never in doubt during the 2008 global economic crisis or even the 2013 taper tantrum and the 2020-21 pandemic — soured?
The coming budget should present an opportunity for the Narendra Modi government to unequivocally convey that India’s growth story is intact and the country remains a compelling place for investors, both domestic and global, to put their money. A rationalisation of GST rates, which are clearly choking demand, is long overdue. So are unproductive expenditures, including on fertiliser and food subsidies, that can be redirected towards less market-distorting income support transfers and much-needed physical as well as social infrastructure. Consumption demand will return only when there are investments that create jobs and incomes. And those investments will come with demonstrable government commitment to macroeconomic stability, policy predictability and ease of doing business. The Modi government must send out one message from the budget — it means business.
