Why the Union Budget No Longer Excites — and What That Says About India’s Investment Malaise

For decades, the Union Budget was one of the most anticipated political and economic events in India’s calendar. This year, ahead of the February 1 presentation, the “Press Information Bureau” has unusually cautioned journalists against speculative reporting. The irony is striking: for the first time in living memory, there is barely any speculation at all. The Budget, once feared and dissected line by line, has quietly lost its capacity to surprise — or scare.

From fiscal shock to fiscal shrug: how the Budget lost its bite

The waning interest marks a sharp contrast with the era that began in 1958, when Budgets became instruments of large-scale income and consumption destruction. That was when the Indian state decided to assume the role of the principal industrial investor, a role it sustained until the shocks of the mid-1960s — wars and droughts — forced a retreat.

After the early 1970s, the state reinvented itself as the chief income redistributor, taxing the rich to “help” the poor. In those decades, the Budget inspired genuine fear. Today, it inspires indifference. The reason is simple: there is no meaningful fiscal room left to manoeuvre.

Why tax policy no longer moves the needle

Over the past six years, India’s tax architecture has been fundamentally reset. Corporate tax rates were slashed to East Asian levels. Personal income taxes were reduced last year. Indirect taxes, after the recent GST rationalisation, are close to their practical floor.

India has, in effect, become a country with reasonable tax rates. The era of overt state-sponsored extraction has largely ended. In aggregate terms, the tax burden is closer to pre-Second Five Year Plan levels than at any point in the past half-century. That should have been a turning point for private investment. It wasn’t.

The horse that won’t drink: private investment paralysis

Despite easier taxes and heavy public spending on infrastructure, private investment remains stubbornly subdued. This is not a new problem. In fact, it was precisely this reluctance that pushed the government into becoming the lead investor in the 1950s. The current government, led by “Narendra Modi”, tried a similar strategy until recently. But the fiscal math no longer works: you cannot permanently cut taxes and simultaneously expand spending on defence, welfare, and capital investment.

Business leaders point to familiar obstacles — weak income growth, sluggish consumption, low capacity utilisation, debt overhang, high land acquisition costs, complex labour laws, regulatory unpredictability, skills shortages, poor logistics, and pervasive corruption. None of these are new; what is striking is how little progress has been made in resolving them despite three decades of reform rhetoric.

Why “ease of doing business” still feels rhetorical

On paper, India has climbed global ease-of-doing-business rankings. On the ground, many entrepreneurs tell a different story. For small and medium businesses, the risk-return equation often appears unfavourable. When fixed deposits can deliver a relatively safe 7% return, the incentive to endure regulatory uncertainty and administrative harassment weakens.

This corrosive environment did not begin in 1991. Many argue it worsened steadily from the 1970s onward, as governments themselves became a source of risk. Even after nearly two decades in power across two stints, the BJP has struggled to dismantle this deeper, institutional hostility to private risk-taking.

What the Budget can — and cannot — fix now

The uncomfortable truth is that the Budget, by itself, can do very little at this stage. The Finance Ministry has already deployed most of its conventional tools. Fiscal incentives cannot compensate for weak policy credibility, fragmented governance, and corruption that raises the cost of every decision.

The result is a dangerous stalemate. The state has limited resources left to substitute for private capital. The private sector, meanwhile, remains unconvinced that the system will protect rather than punish investment.

The political economy roadblock

Breaking this impasse would require politically difficult reforms that go far beyond Budget arithmetic — tackling corruption within the state apparatus, reducing arbitrary discretion, and addressing the constant disruptions caused by perpetual election cycles. Without these, the ambition of “Viksit Bharat” risks remaining aspirational.

India needs its private investment rate to roughly double by 2035. The constraint is not capital availability or tax rates; it is trust in the state. Until governments demonstrate a willingness to reform themselves as aggressively as they urge entrepreneurs to take risks, the proverbial horse may continue to stand at the water’s edge, unmoved.

In that sense, the Budget’s fading relevance is not a sign of maturity alone — it is also a warning. When fiscal policy no longer inspires fear or hope, the problem may lie not in the Budget speech, but in the system surrounding it.