Finance Minister Nirmala Sitharaman is set to present the last budget of the Modi 2.0 government before the upcoming general elections. The budget, expected to be a mix of measures for the economy and targeted segments like farmers and women, is the sixth consecutive one for Sitharaman and may highlight the government’s achievements over the past decade.
While recent wins in three states have reduced pressure for populist measures, Sitharaman is anticipated to maintain fiscal prudence while providing incentives for sectors like agriculture and the engines of the economy to stimulate job creation and consumption.
Technically a vote on account, the budget seeks Parliament’s approval for essential expenditures for the first four months of the new fiscal year, starting in April. The full budget, likely to be presented in July by the newly elected government, will follow the interim budget that serves as a spectacle weeks before the Model Code of Conduct takes effect.
Despite the convention of avoiding major policy announcements in vote-on-account budgets, past governments have made significant announcements, such as the cash dole for farmers in the 2019 interim budget.
The upcoming budget is expected to focus on infrastructure, deviating from the trend of spending on new populist measures. It will also provide an opportunity to assess the fiscal health of the economy against the backdrop of robust economic growth and lay out a roadmap for achieving Fiscal Responsibility and Budget Management Act targets.
While the budgeted fiscal deficit of 5.9 per cent of GDP for the current fiscal year is likely to be achieved, it is nearly double the FRBM target of 3 per cent. EY notes that sustaining nominal GDP growth at 10.5 per cent may take up to 13 years to reach a debt-GDP level of 40 per cent.
The government may allocate subsidies for farmers, women, informal sector workers, and unemployed youth to boost domestic private consumption, which is estimated to show weak growth in FY24. Achieving targeted fiscal deficit reduction will be a challenge, necessitating a significant increase in non-tax revenues like PSU disinvestments.
In an election year, the budget is expected to propose modest pro-demand steps, emphasising an inclusive and prosperous policy push. The BJP’s dominance in recent state elections reduces the likelihood of aggressive competitive populism compared to the 2019 pre-election budget.
(With PTI inputs)