The latest figures speak for themselves: GST rationalisation and festival-related spending supported domestic demand during October-November. Rural demand continues to be robust while urban demand is recovering steadily. Investment activity remains healthy. Private final consumption expenditure (PFCE) expanded by 7.9 per cent during second quarter of 2025-26 as against 7.0 per cent in the first quarter of 2025-26. Gross fixed capital formation (GFCF) also remained resilient at 7.3 per cent in the second quarter of 2025-26.

The going for the Indian economy could not have been better. One of the biggest worries for successive finance ministers and economic administrators of India had been the price situation. Runaway prices had dogged the finance ministers while preparing their budgets. It was strategies for inflation that consumed their skills and effort.

Three particular areas need to be tackled effectively for maintaining the growth momentum. First, encouraging and propping and propping domestic demand. Second, given the current turmoil in global economy, with a spate of free trade agreements being concluded, the finance minister and the commerce minister should put their heads together to rationalise and reform the customs duty structure.

Thirdly, despite many incentives, the industrial and core sectors are proving to be sluggish. India’s industrial great must be close to double digit figure for the overall economy to grow at a fast pace. This should be addressed.

Let us examine these in a little detail. Now, the inflation is no longer a headache — current inflation pathways present an immense opportunity. Since the peak in October 2024, inflation had printed a falling trajectory. For the last few months, it is hovering somewhat below the Reserve Bank tolerance band of plus/minus 4%.

In this context of falling inflation, the finance minister could be expansive. She could embark n ambitious projects to prop up demand. She could expect lower interest rates from the RBI to encourage greater investments.

Indeed, teaming up with their cabinet colleague, Nitin Gadkari, finance minster, Nirmala Sitharaman, might just as well embark on more ambitious roads building. Already, the railways are extending their network of high-speed rail network and other additions to the rail transportation network.

Such large projects and infrastructure building could address one of the key macro-economic issues of the day — maintaining high investment levels in the economy to bolster domestic demand and create employment.

The latest figures and geo-economics suggest that domestic demand is the best bet for the Indian economy to remain buoyant. In the face of uncertain global situation, the Indian economy must bank on domestic market and a strategy for expansion of domestic demand as the principal engine pushing up growth is a safe wager.

Lower interest rates for loans and easier consumer loans, a relook at the capital gains taxes and easier property market rules and structures could hold key for pushing up domestic demand.

If domestic demand is pushing up the pace of the economy at a fairly high pitch, the global environment is tumultuous. India must reset its entire framework for its external economic relations. Free trade agreements are now being concluded dime a dozen, the latest being with the European Union.

This latest FTA is particularly tricky. It was in the making for at least two decades. Yet, all of a sudden this was concluded as if by magic. All sore points brushed over and the deal is done. Looking beneath the surface, this one seems to have been useful mainly as a diplomatic tool than solid piece of economic strategy.

Hence. the budget should make some critical moves to help reset India’s relations with the rest of the world. This could prove to be a huge exercise. For one, the entire set of tariffs should be re-examined in relation to the products and their position in the production chain. A rigorous analysis should be taken up on tariff structure on commodities in relation to their position in the production-consumption matrix.

We have any number of instance of inverse tariffs — that is, end products bear lower tariffs than intermediate ones. These tend to encourage consumption of goods made outside and discourage production of the same within. An exercise should be initiated to correct these anomalies.

The budget should also address critical weaknesses and shortcomings of the economy. Despite a string of efforts and incentives, manufacturing industries and core sector players remain laggards.

The industrial sector has not performed up to the expectations. This needs to be addressed, particularly in the context of the ambitious free trade agreement we are concluding. Growth in index of industrial production (IIP) moderated to 0.4 per cent in October 2025 from 4.6 per cent in September 2025. Construction indicators like steel consumption and cement production recorded modest growth of 2.4 per cent and 5.3 per cent, respectively, during October.

There is need for encouraging the domestic industrial sector. Even some of the recent incentives programmes did not do much to pump up performance of the industrial sector. A double digit growth in industry and manufacturing is a must if India was to maintain a high growth trajectory. State level reforms and performance hold the key to faster growth of industry and the union government should work out detailed industrial growth programmes with the states.

Indian industry must be able to forge proactive roles with their European counterparts and plan for gaining from synergies. It should not happen that we concede more on the one ground than we gain. (IPA Service)