Government News
Analysts Say PM Modi Will Likely Focus On Infrastructure and Avoid Large Budget Expenditures


By - 29 Jan 2024 05:25 PM
"In order to keep the economy booming and close the budget deficit, Prime Minister Narendra Modi is anticipated to defy the conventional wisdom and prioritize infrastructure spending in the budget presented prior to the general election.
The budget for 2024–2025, which will be unveiled by Finance Minister Nirmala Sitharaman on February 1st, is expected to be conservative in spending but heavy on political messaging to support the Modi government’s narrative of inclusive growth.According to Citigroup economist Samiran Chakraborty, ""the government will likely aim to strike a balance between pre-election political messaging, fiscal consolidation needs, and continued focus on capex.""To attract women voters, for example, the government may double the yearly payout to female farmers to 12,000 rupees. However, the policy will only cost $1.44 billion annually, a pitiful amount in comparison to the government's overall spending, as reported by Reuters.
For the upcoming fiscal year, which begins on April 1, the government is expected to maintain its major subsidies at the current level of about $48 billion.
Since it has been operating a subsidized foodgrain program for years, PM Modi's free foodgrain program will also not require any additional funding for the next five years.
Its current goal of 5.9% of GDP for the current fiscal year will be lowered by at least 50 basis points in 2024–2025. The fiscal deficit is defined as the difference between the amount spent and the amount collected.In the hopes that its growth-boosting policies will eventually result in the creation of jobs, the government is expected to ignore the opposition's criticism of the high rate of youth unemployment and keep up its heavy infrastructure spending while attempting to entice both domestic and foreign manufacturers to invest through incentives.
The likely lowering of the fiscal deficit in an election year shows the government may not be relying very heavily on social spending to woo voters but bank on PM Modi's popularity that helped the ruling party win recent state elections and emotive events like the opening of a Hindu temple on a long disputed site.As it is a general election year, there will be at least some temptation from within the ruling BJP (Bharatiya Janata Party) to announce big fiscal giveaways," said Shilan Shah, deputy chief emerging markets economist at Capital Economics.
"But following the BJP's exceptionally strong performance in recent state elections, we think it will conclude that it has enough political goodwill to balance the need for giveaways with its long-term ambition of reining in the fiscal deficit," stated Shah.
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