Finance Minister Nirmala Sitharaman will on Thursday present the Modi 2.0 government's last Budget before the general elections, which is likely to contain a mix of measures for the economy and electorally significant segments like farmers and women.
Peppered with political innuendos, her sixth straight Budget may present a political document with a snapshot of the Modi government's triumphs over the last 10 years and pointers to how it wants to take the country forward.
With pressure for populist measures off after recent emphatic wins in three states, she is expected to stick to being fiscally prudent while sprinkling sops on sectors like agriculture and engines of the economy that would create jobs and boost consumption.
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The Budget she will present is technically a vote on account and popularly termed an interim Budget as it seeks Parliament's nod for a grant in advance to meet the central government's essential expenditure for the first four months of the new fiscal year that starts in April. A new government elected after the April/May general elections will present the full Budget, likely in July.
The interim Budget, however, presents an occasion for spectacle just weeks ahead of the Model Code of Conduct coming into force.
While the precedence dictates that no major policy announcements are made in a vote on accounts, going by past conventions hasn't stopped governments from making big announcements like the cash dole for farmers announced in the 2019 interim Budget.
The Budget is expected to focus on infrastructure and buck a trend of spending big on new vote-garnering measures.
The Budget would, however, provide an occasion to assess the fiscal health of the economy against the backdrop of robust economic growth. It would provide an occasion for the government to give a clear roadmap for achieving the Fiscal Responsibility and Budget Management Act (FRBMA) targets.
The budgeted fiscal deficit of 5.9 per cent of the gross domestic product (GDP) for the current fiscal is likely to be achieved, but it is nearly twice the FRBM fiscal deficit to the GDP target of 3 per cent for the central government. Correspondingly, the debt-GDP ratio at 54 per cent is also well above the target of 40 per cent.
EY, in a note, said the possibility of sustaining nominal GDP growth at 10.5 per cent, it may take up to 13 years to reach a debt-GDP level of 40 per cent. This is based on successfully reducing the fiscal deficit to GDP ratio to 3 per cent by FY29.
Suman Chowdhury, chief economist and head - Research, Acuite Ratings & Research, said, "Given the priority that is likely to be given for fiscal consolidation in the upcoming Budget, we don't expect any significant fiscal stimulus in it. However, the government may continue to earmark a significant quantum for capital expenditure with a growth of 15 per cent in its budgetary allocation; the latter will continue to be a primary driver of the domestic economy over the medium term".
The government may also enhance the subsidy allocation for some segments like farmers, women, informal sector workers and unemployed youth to strengthen domestic private consumption, which is estimated to show a weak growth of 4.4 per cent in FY24, he said.
"Given the need to sustain the public investments and also support certain social segments through subsidies or budgetary relief, the targeted reduction of fiscal deficit from 5.9 per cent to 5.3 per cent will pose a material challenge for the finance ministry, necessitating significant step-up in non-tax revenues like PSU disinvestments."
A research note from the Bank of Baroda said that with the 2024-25 Budget being an interim one, the government will focus on maintaining continuity of policies while committing itself to the path of fiscal consolidation.
"In the wake of weak monsoon, and subdued Rabi sowing, the Budget will focus on steering rural growth. For this, enhanced spending on MGNREGA, PM KISAN, and PMAY can be expected. Driving investment growth will be another focus area for the government. We thus expect Rs 1.5-2 lakh crore incremental increase in capex for the next year."
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Radhika Rao, Senior Economist, DBS Group Research, said the Budget will emphasise an "inclusive and prosperous" policy push in the context of incremental progressive steps in the roadmap over the next 20-plus years toward India@100 (a century since independence).
"In an election year, the government usually tables the vote-on-account or the Interim Budget. A vote-on-account seeks approvals for essential expenditure outlays until the polls, while the interim Budget broadly includes an assessment of the current state of the economy, current/capex expenditures, and receipts, as well as revised estimates of the current financial year and estimates for the year ahead."
Taking a leaf off the pre-election 2019 Budget, "we expect this interim edition to propose modest pro-demand steps to address near-term risks", she said.
In February 2019, the incumbent administration announced fiscal concessions and benefits to the farm sector and other deserving parts of the society. This time, the BJP dominated the recently held state elections, lowering the likelihood of aggressive competitive populism.
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