India gears up for pre-poll interim budget on Feb 1
Experts said the Narendra Modi government is already in an election mode and will tacitly target its key constituents through the interim budget.
Indian prime minister Narendra Modi with finance minister Nirmala Sitharaman (ANI Photo)
INDIA’s Narendra Modi government on Thursday (1) will unveil its interim budget for 2024, leading up to the highly anticipated national elections. Finance minister Nirmala Sitharaman will present the pre-election budget.
The interim budget serves as a temporary financial plan during an election year, addressing immediate financial requirements until a new government is formed. A comprehensive federal budget will only be unveiled post elections in which Modi and his Bharatiya Janata Party (BJP) are eyeing a third consecutive term.
While interim budgets generally refrain from major policy announcements, Nomura financial group highlighted the significance of the February 1 Indian interim budget in a client note, suggesting it could provide insights into the final budget, given the expectations of the ruling BJP’s victory in the elections.
Read: Will present full budget after new government is formed: Modi
The organisation’s economists said the Modi government is already in an election mode and will tacitly target its key constituents and the interim budget is expected to be a political statement, CNBC reported.
The South Asian economy’s fiscal deficit stands at 6.4 per cent of GDP for 2023-2024, aiming to slash it to 5.9 per cent in 2024-2025. Analysts at Goldman Sachs feel the target is achievable, and if 5.8 per cent with restrained spending. They also expect higher subsidies, like for rural employment generation. Nilesh Shah of Kotak Mahindra Asset Management told CNBC about the need for increased divestment to reach the goal.
Read: Modi to bet on popularity, not populism, in pre-poll budget on Feb 1
Goldman Sachs forecasts India to become the world’s second-largest economy by 2075. Presently ranked fifth after the US, China, Japan, and Germany, India’s rise hinges on bolstering infrastructure, enhancing road and railway networks. Kranthi Bathini, equity strategist at WealthMills Securities, said focus on infrastructure is key and that includes healthcare and education as well, according to the CNBC report. Renewable energy and agriculture are also areas that are also being seen with priority.
The Modi government announced in last year’s annual budget that it was raising infrastructure spending by 33 per cent to Rs 10 trillion. According to Nomura, India may increase its capital spending by around 36 per cent in the 2024-25 fiscal, the report added.
On Monday (29), India’s finance ministry said in a report that the country is poised to become the world’s third-largest economy by 2027 with a GDP of $5 trillion. It also predicted the economy to grow at or more than seven per cent in the current fiscal.
In terms of taxes, the analysts did not expect a major shift in the interim budget. The Indian middle class particularly will be keen to see introduction of tax benefits or exemptions for investments in the upcoming budget.