Ajit Ranade: By betting on capabilities, the budget takes a long view on India’s growth

Subscribe to enjoy similar stories. The macroeconomic numbers for India’s economy would be the envy of others. Quarterly growth has been showing steady upward momentum and inflation is ruling at remarkably low levels.

The corporate sector’s balance sheet is healthy, having deleveraged substantially, and profitability has been quite good for the past several years. The banking sector too has been showing good profits and very low bad-loan ratios. Finance minister Nirmala Sitharaman, who created a record by presenting her ninth consecutive budget to Parliament, chose not to be too complacent about the apparent ‘Goldilocks’ type macroeconomic situation India is experiencing.

That’s because behind that growth momentum is a strong capital-expenditure push by the Union government, which, at some point, will need to ease. Low inflation prints have been mainly due to sharp food-price deflation, and that too can turn nastily. Hence, notwithstanding today’s macroeconomic comfort, the finance minister’s approach in her budget has been to focus on building capabilities with a longer-term perspective.

This approach is visible in various schemes for enhancing human capital and skills, strengthening industry-academia linkages and adding tangible elements to support the crucial constituency of small businesses. But before dwelling on the admirable capability-building initiatives, it will be useful to look at the budget’s fiscal arithmetic. We need to assess how credible the budget’s projections are.