India Inc Anticipates Blockbuster Budget from Modi Government, Says MC-Deloitte CEO

India Inc.’s optimism about the economy is soaring ahead of the first budget from the coalition government led by Prime Minister Narendra Modi. An exclusive Deloitte survey of 78 CEOs and CXOs across financial services, consumer goods, technology, and energy sectors revealed that nearly 80 percent are optimistic or very optimistic about India’s economic growth. About 59 percent expect GDP growth between 6.5 and 7.5 percent, while 21 percent are “very optimistic” about growth exceeding 7.5 percent. This July 23 budget follows Modi’s third term as Prime Minister, despite his Bharatiya Janata Party failing to secure a majority. The survey shows that political complexities have not dampened India Inc.’s optimism.

A significant 73 percent of top executives identified physical and digital infrastructure as key growth drivers, while 72 percent cited a young, skilled workforce and a large consumer base. Bold reforms are crucial for boosting manufacturing and job opportunities, according to 51 percent of respondents. Regarding the central bank’s FY25 inflation target of 4.5 percent, a majority are moderately confident, with 14 percent highly confident. Fifty-four percent expect no change in The Reserve Bank of India’s policy rates over the next six months, while 27 percent anticipate a decrease of 25-50 basis points. On ease of doing business, India Inc.’s top wish is a simpler tax regime and compliance, with 87 percent of respondents advocating for this. Additionally, 55 percent identified digital, online single-window systems for clearances, and 29 percent sought the fast disposal of commercial disputes.

With stock markets reaching new highs, 55 percent of respondents believe current stock market valuations are “moderately overvalued,” while 22 percent see them as undervalued. Geopolitical risks and commodity price volatility are seen as the key global risks to Indian businesses, with 26 percent identifying a global economic slowdown, particularly modest growth in China and the US, as the next big threat. On the reforms agenda, 69 percent of CEOs expect the government to focus on capital expenditure, tax simplification, revenue augmentation, governance, and energy reforms. Only 14 percent expect populist measures such as subsidies and cash transfers to take precedence over capital spending and infrastructure.

India Inc.’s top reform agenda includes accelerating investments and trade reforms to boost exports and attract foreign investments by simplifying the tax regime. The country aims for a 4.5 percent fiscal deficit by 2025-26. Interestingly, 38 percent of respondents view government initiatives targeting health, skilling, and SMEs as positive, even if they incorporate populist policies. However, 32 percent believe that pursuing populist policies could undermine investment confidence. Regarding corporate tax rates, 67 percent expect a stable regime with no reduction, while 17 percent anticipate a moderate reduction. In recent decades, India’s corporate tax rates have nearly halved, with a significant cut in the 2019 budget.

Currently, Indian companies with revenue up to Rs 400 crore pay a 25 percent tax, which rises to 30 percent for larger companies. In 2019, a lower 22 percent rate was offered to companies opting out of exemptions. Making India a semiconductor hub also tops India Inc.’s agenda, with 58 percent of CEOs emphasizing the government’s role in promoting research and development. Overall, the MC-Deloitte survey shows India Inc.’s confidence in the country’s growth story despite the challenges of coalition politics and calls on the government to simplify compliances and boost the ease of doing business.