The Hindu: Published on 11th Feb 2025:
Why in News?
The Union Budget 2025-26 was presented in the backdrop of global uncertainty and a slowing domestic economy.
It introduced key reforms focusing on urban development, tariff rationalization, and regulatory simplification to enhance competitiveness.
The budget aims to address India’s urban stagnation, high tariff structures, and regulatory complexities to boost economic growth.
Key Highlights of the Budget
Urban Development Focus: Recognized as a critical driver of economic growth, with ₹1 lakh crore allocated for infrastructure improvements.
Tariff Rationalization: Reduction in Basic Customs Duty (BCD) on key imports to boost competition.
Regulatory Simplification: Proposal for a High-Level Committee for regulatory reforms to improve ease of doing business.
Economic Context & Challenges
Growth Concerns: Real GDP growth estimates of 6.3-6.8% for 2025-26 fall short of the 8%+ required to achieve the 2047 developed nation goal.
Urban Productivity Stagnation: Urban GDP share has remained stagnant (~55%) despite increasing urbanization.
Infrastructure Deficit: Poor service delivery in waste management, water supply, and housing affordability hinders economic efficiency.
High Tariff Burden: Domestic producers and consumers bear higher costs due to elevated import tariffs.
Potential Impact of Budget Reforms
Urban Infrastructure Boost: The Urban Challenge Fund could improve service delivery if implemented efficiently.
Housing Affordability: Transparent land-use planning may lower housing prices and increase real estate competition.
Trade Competitiveness: Lower tariffs could enhance India’s position in global value chains.
Business Environment: Simplifying regulations may attract more investments and enhance corporate competitiveness.
Implementation Challenges:
Governance Issues: Short tenures of municipal commissioners (~10 months) may limit urban reform execution.
Partial Tariff Adjustments: India's tariffs remain higher than regional competitors like Vietnam and China.
Regulatory Delays: Effective execution of regulatory reforms is uncertain without time-bound action.
The Road Ahead
Strengthening urban governance to ensure infrastructure investments yield tangible improvements.
Further tariff reductions and removal of AIDC to make Indian businesses globally competitive.
Expedited and transparent regulatory simplification to sustain economic momentum.
Conclusion:
The Budget 2025-26 takes an important step toward economic competitiveness but requires sustained reforms and efficient implementation to achieve long-term growth objectives.
