First budget of Modi 3.0 likely to focus on jobs, rural India, says Goldman Sachs

ECONOMISTS at Goldman Sachs in a note on Monday (8) said the maiden budget of prime minister Narendra Modi's new government is likely to lean towards, rather than fully embrace, welfare spending, with an emphasis on the rural economy and generation of employment.

The government confirmed over the weekend that the budget proposal for the financial year ending on March 31, 2025, will be tabled on July 23. The full-fledged budget was delayed this year due to the general elections that concluded last month. On February 1, an interim budget was presented by Indian finance minister Nirmala Sitharaman, who will also introduce the document later this month.

Goldman economists anticipate that the government will adhere to its fiscal deficit target of 5.1 per cent of GDP as established in the interim budget. However, they suggest that the government is likely to make an "overarching statement" about long-term economic policy, Reuters reported.

Read: FM Sitharaman to present first budget of Modi 3.0 on July 23

"We see an emphasis on job creation through labour-intensive manufacturing, credit for micro, small and medium enterprises, continued focus on services exports by expanding global capability centres, and a thrust on domestic food supply chain," Santanu Sengupta, chief India economist at the Wall Street bank wrote, according to the report.

The upcoming budget is in focus particularly after Modi's Bharatiya Janata Party failed to win a majority on its own in the national elections this year and had to bank on allies to form the government. Post-poll surveys revealed that lack of jobs and inflation were key concerns among voters, particularly those outside the urban centres.

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Despite the Indian economy projected to grow rapidly at 7.2 per cent this year, there has been a notable lag in job creation.

"Even 7% GDP growth might not be able to fulfill the job requirement over the next decade," Citi's chief India economist Samiran Chakraborty said in a note last week, adding that growth of close to seven per cent will generate eight to nine million jobs per year, falling short of the required 11-12 million.

Goldman Sachs also anticipates a concentration on enhancing agricultural infrastructure and providing incentives to boost domestic production of essential crops, aiming to address persistent high food inflation, which has hovered around eight per cent for several months.

(With Reuters inputs)