India’s GDP growth for the second quarter of FY25 stood at 5.4 percent, driven by the slowdown caused by the Lok Sabha elections. However, the outlook for the third quarter is more optimistic, with a boost expected from festive spending. The government is also banking on the larger impact of new tax reforms to drive growth, with unprecedented income tax cuts designed to increase disposable income.

The newly introduced tax cuts benefit over 75 percent of salaried individuals, with people earning Rs. 10 lakh annually gaining an additional Rs. 50,000 in disposable income. Higher earners, such as those making Rs. 25 lakh, will see an additional Rs. 1.1 lakh. This leaves households with more spending power, which will likely be used for consumption, including food, FMCG products, and even big-ticket items like cars, improving both domestic demand and the government’s indirect tax revenue.

The government is also placing a strong emphasis on agriculture, focusing on crop diversification and improving infrastructure to support farmers. The Dhan Dhaanya Yojana targets rural districts with the lowest productivity, aiming to increase the disposable income of farmers and improve market access. This initiative, alongside the promotion of Farmer Producer Organisations (FPOs), will be pivotal in integrating small farmers into India’s growth story.

In addition to short-term measures, the government is committing to long-term asset creation, with a capex of over Rs. 50 lakh crore over the last four budgets. This will fund critical infrastructure projects in sectors like roads, railways, and defense, driving both employment and economic growth. These projects have also had a positive impact on women’s employment and entrepreneurship in various regions.

The focus on manufacturing is also reshaping India’s job market. With a push towards formalisation and growth in MSMEs, more people are expected to seek opportunities in manufacturing, which will foster a new wave of employment.

Furthermore, the government is looking to capitalise on smaller, innovative ideas. An example is transforming India Post into a major logistics player integrated with the Open Network for Digital Commerce, which would support MSMEs and young entrepreneurs across the country.

The Modi government’s fourteen budgets tell a story of significant reforms, from reducing tax rates to narrowing the fiscal deficit. The welfare transfer programs, which amount to Rs. 40 lakh crore, have directly benefited millions, further reinforcing the government’s focus on inclusive growth.

The message from the budget is clear: Now is the time to invest in India and grow with the nation. With a focus on both macroeconomic stability and microeconomic development, the government’s policies are set to drive India’s economic future.

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In the Union Budget for 2025-26, the government announced the establishment of a Makhana Board in Bihar to improve the production, processing, value addition, and marketing of the crop. This will further support the livelihoods of farmers and entrepreneurs involved in Makhana cultivation. Over the years, over 15,824 kg of high-yielding Makhana seeds have been distributed to farmers and organizations, enabling better yields and fostering regional agricultural growth.

The National Research Centre for Makhana (NRCM) in Darbhanga has played a key role in this expansion, conducting research to improve Makhana farming practices. The NRCM has developed high-yield varieties of Makhana and introduced water-efficient farming systems, benefiting thousands of farmers through training and technical support. Additionally, new machinery for Makhana processing, such as popping machines and seed graders, has been introduced to aid commercialization.

From 2012 to 2023, NRCM trained over 3,000 farmers in advanced cultivation and processing techniques, driving both agricultural and economic growth in the region. The center’s efforts also assisted 24 enterprises, including Mithila Naturals and Swastik Food Group, contributing to the growth of Makhana-based industries and the agricultural economy.

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According to the report, “Bank credit growth in 2023-24 was broad-based, led by services sector and personal loans segment, followed by agriculture and industry.” This indicates a diversified credit portfolio by banks, which is crucial for enhancing profitability while managing risks effectively.

One important aspect of the RBI’s report is its reference to the impact of stricter lending norms introduced in November. These regulations have influenced areas like consumer durables, credit card receivables, and loans to non-banking financial companies (NBFCs), where the increase in risk weights resulted in slower credit growth in these segments.

The report also noted a significant change in the share of personal loans and services in total bank credit. At the end of March 2013, personal loans accounted for 17.1% of the total credit, while services held a 21.9% share. By the end of March 2024, personal loans had grown to 32.4%, and services to 27.9%. This shift reflects banks’ growing focus on diversifying their credit portfolios and targeting higher-margin sectors.

On the matter of asset quality, the RBI report highlighted sector-specific variations in the gross non-performing assets (GNPA) ratio. As of September 2024, the agricultural sector recorded the highest GNPA ratio at 6.2%, while the retail loans segment posted the lowest at 1.2%. The industrial sector, in particular, showed significant improvements in asset quality, with its GNPA ratio dropping to 2.9% in September 2024, continuing its positive trend since March 2018.

Additionally, education loans saw a considerable reduction in GNPA ratios, dropping from 5.8% in March 2023 to 2.7% in September 2024. Despite this improvement, education loans still have the highest GNPA ratio among retail loan segments, followed by credit card receivables and consumer durables.

The RBI’s report underlined the importance of risk management and credit diversification as essential strategies for banks to sustain growth and profitability, all while ensuring the stability of the financial system.

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