Before the Lok Sabha elections in 2024, Finance Minister Nirmala Sitharaman will present the final full-fledged budget of the Modi administration.
India’s budget on Wednesday will test the government’s resolve to remain fiscally prudent as expectations of lower taxes, a broader social security net, and a further boost to production gather steam ahead of national elections. This comes as Prime Minister Narendra Modi’s final full-year spending plan before the elections in 2024 comes amid rising interest rates and slowing global growth, which could cause him to abandon outright populism.
According to economists and reports in local media, Finance Minister Nirmala Sitharaman may alter income tax rates to aid the nation’s vast middle class, increase spending on the poor through programs like rural jobs, and increase financial incentives for local manufacturing.
According to India Ratings & Research Pvt., social welfare programs will receive “appropriate” funding because “the gap between have and have nots has widened.” Devendra Kumar Pant is an economist. Relief from taxes “can provide the much-needed thrust to the consumption demand,” as inflation has reduced spending power.
As interest rates rise and global growth slows, Prime Minister Narendra Modi’s final full-year spending plan before the 2024 elections could cause him to abandon outright populism. According to a Bloomberg survey, economists anticipate that the fiscal deficit will fall from 6.4% this year to 5.9% of GDP, necessitating yet another record year of borrowing.
The finance ministry said in its Economic Survey on Tuesday that India will focus on rebuilding the fiscal space it lost during the pandemic to counter new risks from a challenging global environment. The ministry projects economic growth of 6.5 percent next year.
The US short seller Hindenburg’s scathing report on billionaire Gautam Adani’s conglomerate has also put the country in the spotlight, and the issue may reverberate during the budget session of parliament. While markets will be closely watching for the budget speech at 11 a.m. local time to see what Asia’s third-biggest economy has in store for investors, Hindenburg’s report has also put the spotlight on the country.
Tax Tweaks Sitharaman’s recent remarks that she is aware of the “pressures of the middle class” have fueled speculation that she will give taxpayers money. However, there are no freebies. “Yes Bank economists led by Indranil Pan predicted a 15% increase in tax receipts next year, and any tinkering with rates at the lower income brackets will be compensated by increasing the cess/surcharge for the upper income bracket.”
According to The Economic Times, she may also increase import duties on private jets, helicopters, high-end electronic goods, and jewelry to encourage domestic manufacturing.
Social Sector India’s unemployment rate reached a 16-month high of 8.3% last month, highlighting the difficulty in employing the world’s largest population. Radhika Rao, an economist with the DBS Group, believes that this year’s allocation of 730 billion rupees ($9 billion) will be spent on rural job guarantee, crop insurance, rural road infrastructure, and affordable housing.
Oxfam India claims that despite India’s world-beating growth, 21 of its wealthiest billionaires own more wealth than 700 million Indians. According to State Bank of India economist Soumya Kanti Ghosh, the budget may expand the scope of small savings plans for the elderly and female children.
Manufacturing Since India is positioning itself as an alternative to China in the global supply chain, manufacturers who want to set up factories there expect the government to give them more money. According to Hindustan Times, the budget may include production-related incentives for toys and shipping containers.
According to Yes Bank analysts, strategies can be tailored to deepen and broaden output-linked benefits to encourage manufacturing and the creation of jobs.
