A Budget for the emerging new global order: How India positions itself

The ninth consecutive Budget presented by Finance Minister Nirmala Sitharaman has, among many other important features, a remarkable one: it is a tool for India in asserting its place in the new global architecture already emerging.There is significant coherence and complementarity among the various elements presented by the Finance Minister. First, the Budget highlights the priority of increasing the push for infrastructure development and enhancement, with the emphasis on ports, roads, growth of Tier 2 and 3 cities and also the creation of seven high-speed railways corridors linking India’s major cities.

 

Such a priority has to be put in the context of achieving the goal of Viksit Bharat, which requires a tremendous boost to economic development. And this cannot be achieved without a significant scaling up of the country’s manufacturing base —focusing on seven strategic sectors. No country of the size and population of India can dream of becoming an economic power with a manufacturing sector representing only about 16 or 17 per cent of its GDP. And no country with a relatively narrow manufacturing base can dream of becoming the «plus One» element of the «China plus One» strategy for MNCs — which is how India wants to position itself.

 

The measures to promote and further the Make in India policy have to be seen in this context, such as the SME Growth Fund announced in the Budget. There is no underestimating the role played by SMEs in enhancing the granularity and increasing the efficiency of supply chains.

 

The second is that the Modi government is reasserting the priority given to developing and leveraging AI, semiconductors, and other frontier technologies. In that respect the tax holiday offered to foreign companies providing cloud services from India-based data centers is to be noted. In the very fierce technology confrontation between the US and China and the fragmentation of the global technology landscape, this element is existentially critical for India.

 

It is the same recognition of the uncertainties and risks involved in the transition towards a new world order or architecture that dictates the 15 per cent increase of the defence Budget.

 

The third point to be noted in the Budget is the continuous priority given to fiscal discipline. On the one hand, the forecast for FY26/27 is a GDP growth of 7-7.5 per cent in line with the same performance for the ending fiscal year — although the IMF forecast puts the FY 26/27 growth at 6.4 per cent.

 

However, despite some significant increases in many items in the Budget, and the reduction of excise and custom tariffs — from 20 to 10 per cent — to support sectors hit by the US tariffs, increase in international competitiveness and household consumption, this goal is to be achieved with a reduction from 4.4 per cent to 4.3 per cent for FY 26/27 of the fiscal deficit, and a further reduction of the debt to GDP ratio from 56.1 per cent to 55.6 per cent.

 

The stock market reacted negatively to the Budget, because of the increase of certain taxes on securities transactions. However, these measures have to be seen as a lesser evil, given the essential need to spur economic growth and to consolidate India’s global positioning.

 

The writer is founder & chairman of Smadja & Smadja Strategic Advisory and  founder of the India Global Innovation Connect