Budget 2024: Has BJP's state election wins dimmed mega sop chances in interim budget?

Modi addresses party’s National Convention, says he has invitations from countries till Sept. Not seeking a third term for the sake of power, but for the resolve of the nation, he adds.

Before the general election, Prime Minister Narendra Modi is likely to change the usual pattern of big spending on new welfare programs.

Three credit rating agencies hold over 90 per cent of the global market. Two of these agencies have said that Sitharaman's interim budget changes little for them at this time. The government has been for long complaining about the rating agencies failing to acknowledge India's improving economic conditions and of biases in their approach.

India's ruling Bharatiya Janata Party (BJP) has gained momentum in the Maharashtra state as prominent opposition leader Ajit Pawar and several lawmakers from his former party joined the provincial government. Most foreign institutional investors from the key US and Europe region have grown optimistic about India and have also largely priced in Modi winning the upcoming parliamentary elections.

Moody's analyst says India's debt affordability hasn't significantly improved, keeping sovereign ratings unchanged. The government's fiscal consolidation trend is positive, but proactive measures for revenue generation and achieving the fiscal deficit target are critical. India plans to reduce the budget gap sharply by 2024/25. Economic growth is healthy, supporting momentum in revenue generation. The government may need to support the economy amidst global risks.

Government remains confident about reaching its budgetary targets for the fiscal year 2023-24 and achieving the 5.9% fiscal deficit goal

The response to Finance Minister Nirmala Sitharaman's interim budget has highlighted the absence of populist measures and a commitment to a five-year fiscal consolidation plan. Despite facing challenges such as the pandemic, energy, and food price shocks, the government has maintained fiscal rectitude. The budget signals a shift towards private and corporate spending to support the economy, with a focus on manufacturing, geographical inclusivity, and urban development. The government's strategy for 2025-30 includes fostering a manufacturing surge, developing the eastern region, and addressing the housing needs of the middle class.

Policy continuity is crucial for sustainable economic growth. The interim budget reflects the Modi government's commitment to this principle, focusing on empowerment over entitlement, sustainable development, and fiscal management. The government has redefined inclusion as empowerment since 2014, and the budget continues this approach by prioritizing the needs of the poor, women, youth, and farmers.

The fiscal deficit target of 5.3% will be set by the government in FY25, keeping in view the fiscal consolidation path till FY26, as it normalises capital spending and refrains from any major announcements in the interim budget before the general elections, Icra and Barclays economists have said. ICRA expects the fiscal deficit target for FY25 to be set at 5.3% of GDP, midway through the expected print of 6.0% for FY2024 and the medium-term target of sub-4.5% by FY26.

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