By now, the alleged lack of so-called “Big Bang Reforms” in the highly anticipated, first full-year budget released last week by the government of Indian prime minister Narendra Modi has become common market talk.

The budget, after all, provided the opportunity for the Modi government — which came to power with a landslide majority — to “showcase itself,” said Nick Smithie, chief investment strategist in charge of Emerging Global Advisors’ emerging market investment strategy, and enact the kinds of difficult reforms that financial market participants and foreign investors would want to see enacted, and that are always easier to pass in the early life of a new administration.

Nevertheless, Smithie is one among numerous investors who believe the budget is solid and includes numerous items that will not only further bolster India’s strength as a leading emerging market economy but also contribute toward enhancing its investment appeal.

“Since the financial crisis, global growth has been disappointing and the market has rewarded those countries where there’s growth and reform,” Smithie said. “Both of these are present in India, where by 2060, growth is slated to overtake China’s.” India is a large and complex nation, said Peter Kohli, CEO of DMS Funds, and although many feel the speed at which reforms are taking place could increase, the progress thus far is significant for a country where economic liberalization, when it got going in the 1990s, represented a tremendous shift in mindset.

The budget is positive for inclusive growth in India, Kohli said, and that being India’s focus, “any Big Bang-type reforms undertaken at this point could possibly backfire.”

One area investors were disappointed about was the budget’s failure to address the hefty subsidies that the Indian government disburses for diesel, fertilizer and cooking gas, among others. Most investors had hoped for this, Smithie said, not least because India is a huge importer of oil and its current account deficit has been large because of this. The current low price of oil combined with the removal of subsidies could have helped India’s deficit problem, he said, however, there are other areas in which the budget is very positive for the Indian economy, not least increased funding plans for the development of infrastructure, which is badly needed in India, as well as measures to increase privatization and incite increased foreign investment into India. The budget also includes the introduction of REITS in the Indian market, calls for a reduction in corporate tax rates and allows foreign portfolio investors to invest directly in Indian companies, something that until now, could only be done by foreign direct investors.

“Although I would have liked to have seen a harder bargain driven on fiscal consolidation, India is undoubtedly a growth and a reform story that is really without parallel in emerging market universe,” Smithie said.

According to Kohli, the budget’s social bent bodes particularly well for Indian banks. Infrastructure projects, and the building of everything from roadways, to toilets and homes in rural areas to improve the living standards of scores of Indians, will mean increased lending opportunities for private sector banks, whose stock prices jumped after the budget was announced, he said.  

The budget is also revolutionary in that it is the first Indian budget to include the idea of a social security system for all Indians. There are no details yet on how this would come about, of course, Kohli said, and it would require proper funding from a reliable tax base. However, taxation is another issue that the budget addresses seriously, not just through the introduction of a new goods and services tax that will bring together India’s disparate tax codes in a national, VAT-like structure, but also because it calls for a serious crackdown on fraud and tax evasion, issues that have plagued India and eroded public finances for decades.

India still has a host of social problems to contend with and that threaten to derail progress at any time. The status of women is one issue that has come to global attention since the 2012 gang rape of a young woman on a New Delhi bus, and last week, the Indian government banned “India’s Daughter,” a documentary on the subject, thereby prompting the BBC to bring forward the screening on its network in England, and leading the film maker to leave India on fear of being arrested. India’s intertwined caste and class systems, Kohli believes, are a perennial problem, and as much as India has enormous human capital, “I believe its greatest weakness is the chance that many people can get left behind,” he said.

That’s why growth with inclusion is so important for India, Smithie said, because it is only when all segments of the population can participate that full growth can be realized.