Indonesia’s Fiscal Strategy Offers Lessons for India’s Welfare Expansion
As India aims to become a $7 trillion economy by 2030, the challenge is shifting from simply driving economic growth to funding it responsibly. Expanding social welfare programs without straining public finances is a key policy dilemma, and a recent fiscal strategy implemented by Indonesia offers a potential model for India to consider.
In 2025, under President Prabowo Subianto, Indonesia undertook a significant fiscal reallocation that created nearly $30 billion in fiscal space without resorting to increased taxes or widening the budget deficit. This was achieved not through new revenue streams, but through a focused effort on improving governance and resource management, according to reports.
The Indonesian approach centered on three key areas: cutting waste, tightening enforcement of existing regulations, and recovering lost revenue. This demonstrates that robust governance can effectively fund welfare initiatives while simultaneously preserving macroeconomic stability. The reforms began with a commitment to spending discipline, sharply curtailing non-essential expenditures.
Specifically, the Indonesian government streamlined procurement processes, reduced ceremonial and administrative costs, and trimmed spending on less impactful programs. According to Dr. Prabhakar Patil, former Chief General Manager at Sebi and an IIT Mumbai doctorate in economics, the shift in mindset is critical. “Most governments look at welfare through the lens of additional spending. Indonesia showed that the first step is to ask where money is leaking and how efficiently the existing budget is being used,” he said.
Reportedly, Indonesia achieved substantial savings through targeted cuts, including a 90 percent reduction in procurement waste, a three-quarters reduction in printing and ceremonial expenses, and significant savings on building rental costs. Importantly, these savings were realized without compromising essential public services.
India, which is also pursuing welfare expansion alongside fiscal consolidation, could benefit from adopting a similar approach. The country has long struggled with inefficiencies in procurement, overlapping government schemes, and high administrative overheads. Addressing these issues could unlock significant resources for social programs without increasing the national debt.
The Indonesian model highlights the importance of focusing on how public money is *used*, rather than simply allocating more funds. By prioritizing efficiency and accountability, governments can maximize the impact of existing resources and create fiscal space for essential welfare initiatives. This approach offers a viable path for India to achieve its economic goals while simultaneously investing in its citizens’ well-being.
The success of Indonesia’s strategy underscores a broader point: effective governance is not merely a prerequisite for economic development, but a crucial enabler of sustainable social progress. By prioritizing fiscal responsibility and efficient resource allocation, India can learn from Indonesia’s example and build a more robust and equitable future.
