As India prepares its annual budget for 2025-2026, the government faces a delicate balance between fiscal prudence and stimulating economic growth. Experts predict that the government will prioritize reducing the fiscal deficit, possibly lowering it by 50 basis points to 4.4% of the GDP, compared to 4.9% in the current fiscal year.
Finance Minister Nirmala Sitharaman will present the budget on February 1, 2025, marking the coalition government’s first full-year budget. The backdrop is a slowdown in growth, weak domestic demand, a depreciating rupee, and rising global uncertainties. The economy has been affected by unseasonal rainfall, fiscal tightening, and modest credit growth as the central bank curbed unsecured lending.
Experts, including Goldman Sachs, predict that the budget will focus on job creation, especially in labor-intensive manufacturing, and additional measures to control price volatility. With slowing domestic consumption, the government is expected to fine-tune existing measures and offer some support to boost demand, particularly by offering tax relief for middle-income households.
Despite these efforts, there are concerns that fiscal discipline will limit public spending, with Goldman Sachs projecting a further slowdown in public expenditure. Meanwhile, the government’s disinvestment goals are expected to be scaled back by 40%, with a target of 300 billion rupees for the next fiscal year.
Amid these challenges, the government is also focusing on improving infrastructure and prioritizing spending on roads, railways, and airports, which could provide a longer-term boost to the economy.
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