Interim Budget: Road to reforms to go through states

Finance minister Nirmala Sitharaman sought to draw up the agenda for "next-generation reforms" that will propel India into the league of developed nations by 2047, working with "states and other stakeholders to build consensus for effective implementation."

States will get a Rs 75,000 crore boost in the form of interest-free loans to pursue reforms and the assistance will be linked to stipulated reform milestones, she said. Finance secretary TV Somanathan clarified this assistance will be a part of the Rs 1.3 lakh crore capex loans that the Centre has budgeted to extend to states in FY25.

NR Bhanumurthy, vice chancellor at Bengaluru's BASE University, said the move seems aimed at narrowing the divergence in regional growth by incentivising states, including laggard ones, to implement reforms and grow faster. "The linking of outlay to outcome on the reforms front is important. India can become a developed nation faster if all states contribute to it instead of a few," he said.


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The government wants to maintain the momentum of the financial sector, which is crucial to meeting its investment targets for economic growth. In her speech, Sitharaman said the government will prepare the financial sector in terms of size, capacity, skills and regulatory framework to meet the investment needs of the economy.

Himanish Chaudhuri, partner and financial services, Deloitte India, said the government's financial sector reform push will involve expanding the digital infrastructure. "The government will like to keep the digital momentum as India enters the last mile to comprehensive digitisation. This will include proliferation and expansion of the bouquet of government schemes leveraging the digital infrastructure such as ONDC (Open Network for Digital Commerce), OCEN (Open Credit Enablement Network) etc., which will ride on the backbone of UPI and other established payment systems," Chaudhuri said.

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The government is also expected to give final shape to the Insurance Amendment Bill, which is slated to be introduced next fiscal, paving the way for strategic reforms in the sector. One general insurance firm will be put on the block after the government notified the General Insurance Business (Nationalization) Amendment Act.