For almost all the 75 years, wealth and salaries earned by Indians were highly taxed by the government. The tax regime from the early misguided Nehruvian Socialism was built on high tax rates. This is why, till 2014, India’s tax-to-GDP ratio was among the lowest in the world. Arguments against tax reforms were almost always that the government depended on squeezing hard-working Indians for its functioning and expenses. It felt that it was India’s destiny and indeed honest Indians’ destiny to be heavily taxed

But for the last 10 years PM Modi worked relentlessly on his vision to make sure India’s economy could grow and expand quantitatively and qualitatively. Digitialising, better design and monitoring of schemes, GST reforms and good economic policies that focussed on permanent long-term growth paid dividends—India has leapt from a ‘Fragile Five’ economy to one that is in the top five and fastest growing in the world.

This transformation expanded the economy, which led to sustainable growth of government resources. That in turn enabled the next step— increasing public spending on infrastructure that had been neglected for decades and was becoming a big bottleneck for investments and economic growth. Record public spending on infrastructure and the PM Gati Shakti is making India a competitive economy vis a vis other manufacturing nations.

Steady steps

I said earlier this was a milestone budget. The last decade of infrastructure development, social security, and skills have created indirect benefits. But this budget delivers a direct benefit that increases the disposal income for the majority of taxpayers in the country. It moves the Income Tax exemption to Rs 12 lakh, i.e. Indians earning up to Rs 12.75 lakh per annum pay zero income tax. It had incrementally inched up from Rs 1 lakh in 2014 to Rs 7 lakh in a decade. And in one fell swoop PM Modi has delivered the fruits of 11 years of hard work in expanding the economy and the government’s fiscal capacity.

Some years ago, I had the opportunity to visit Ahmedabad and the Sabarmati riverfront. That visit was an epiphany because it taught me PM Modi’s approach to solving deep, seemingly intractable problems— he takes them head-on with a multi-year plan and clear outcomes. It requires patience and is often met with opposition from people who don’t understand or prefer shortcuts and instant gratification. The transformation of the Sabarmati riverfront is testimony to that approach. Indian economy in 2014 was such an intractable problem. He has taken the same long-term approach to this. Steady and systematic steps have led to this Budget.

Looking back it’s difficult to gauge which was Modi’s “big” budget—but the sum total of 10 years of economic policy has brought us to a point where India is not just the world’s fastest-growing economy, but it is a resilient economy that continues its growth despite the obvious global headwinds. This is why the government can give the honest taxpayers of India a windfall tax break that is more than Rs 1 lakh crore or 3.5 per cent of the budget. That too with no cutbacks in spending or the projected glide slope to fiscal consolidation. The impact of this is akin to a stimulus of 3.4 to 3.5 per cent of the Budget. But unlike the UPA stimulus in 2008, which shattered the Indian economy and banking system, this one is factored into the growth momentum.

A diversified economy

There are a lot of other moves that PM Modi has rolled out in this Budget, whose real contribution to growth will show up down the road. The focus on agriculture makes it clear that the narrative around it will be rewritten by farmers as they transition to a value-adding, profitable activity for the economy. MSMEs getting their MSME credit card and more credit, and continuing focus on startups and entrepreneurship shows the PM’s commitment to continue to diversify and expand the economic activity and job creators. It’s a far cry from the pre-2014 days when everything in the economy depended on credit and capital concentrated on a few industrial groups—when they caught a cold, our economy caught a cold.

Today, our economy has diversified and expanded in unprecedented ways. A similar investment for the long term is the focus on Nuclear Small Modular Reactors (SMRs), with a Rs 20,000 crore outlay that will play a big part in India’s NetZero goals.

For businesses, there is the additional promise of a simpler tax code to be introduced next week in Parliament and the promise of a government that will continue its record of simplifying regulations and laws.

Amidst the usual noise of Budget coverage, something that Monika Halan, a respected financial analyst and commentator, said caught my attention. She said the tax reforms in this Budget mark a major rerating of our economy and our ambitions. We are no longer a low-income country—we are credibly marching upward. That is absolutely true. If you ignore the usual clamour of naysayers from the Opposition and look at what this Budget represents, you can’t help saying thank you to PM Modi for bringing us to a place where we are reimagining our ambitions as an economy.

NewIndia will become ViksitBharat. Budget 2025 tells us, in the words of Barack Obama, Yes, we can.