Prime Minister Narendra Modi will likely use India’s last budget before the elections to woo voters with new spending measures, while avoiding a fiscal deficit increase.
The economy’s rapid expansion has led to a tax windfall for the government, helping it meet its goals of curbing the deficit. That means Finance Minister Nirmala Sitharaman, who will deliver her sixth budget speech on February 1, has scope to keep infrastructure spending going and take targeted steps to support PM Modi’s priority sectors for the elections: farmers, women, the poor and young people.
But don’t expect a spending spree either, economists say. The budget this week is an interim one until a new administration takes office, and the finance minister has already hinted there won’t be any major announcements.
“It’s likely to be watched for the pace of fiscal consolidation and policy priorities ahead,” said Madhavi Arora, an economist with Emkay Global Financial Services Ltd.
PM Modi is also in a strong position to extend his decade in power in upcoming elections, so there’s less pressure to take populist steps, Bloomberg Economics’s Abhishek Gupta said in a report. The fiscal plan is expected to signal policy continuity, he said.
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