Pre-Budget Focus: Finance Ministry Unveils MSME-Centric Reforms For Economic Resilience, Growth
The Finance Ministry has outlined key areas for upcoming reforms, emphasizing skilling, learning outcomes, health, energy security, reduced compliance burden for MSMEs, and gender balancing in the labor force. In a pre-Interim Budget review, the ministry projected that, under certain assumptions regarding inflation differentials and exchange rates, India could potentially achieve a USD 7 trillion economy by 2030.
According to the Ministry, this milestone is expected to significantly enhance the quality of life for Indian citizens. The ministry expressed confidence in India's economic growth, citing a potential growth rate exceeding 7 per cent by 2030, driven by the financial sector and ongoing structural reforms. The primary concern identified is the elevated risk of geopolitical conflicts.
Structural Reform Outcomes
The review highlighted the positive impact of recent reforms, including strengthened balance sheets through the Insolvency and Bankruptcy Code (IBC), which has freed up economic capital. The pace of physical infrastructure development is contributing to a decline in Incremental Capital Output Ratio (ICOR), translating private investments into output swiftly. The digital infrastructure's expansion is improving institutional efficiency, and technological progress is accelerating through collaborations with foreign partners.
Economic Reforms Overview
Efforts to speed up human capital formation were acknowledged, and the overall investment climate was deemed increasingly favorable, supported by continuous improvements in ease of doing business. The adoption of the Goods and Services Tax (GST) was noted for unifying domestic markets, incentivizing larger-scale production, and reducing logistics costs. The GST's expansion of the tax base is expected to strengthen both Union and state government finances, facilitating growth-enhancing public expenditures.
The Reserve Bank of India's growing credibility in controlling inflation was highlighted as a stabilizing factor, anchoring inflationary expectations and providing a stable interest rate environment for businesses and the public to make long-term investment and spending decisions.