Interim budget: With eye on polls, FM looks to meet expectations

Bengaluru: At 11 am on Thursday , Finance Minister Nirmala Sitharaman will rise to present the interim budget for the coming financial year (2024-25). This will be her sixth consecutive budget speech, a feat only achieved by the late Morarji Desai.

Given that we are just months away from the Lok Sabha elections, this will be an interim budget, to lay down the government’s expenditure priorities for the April-June 2024 quarter. The full budget for the year is likely to be presented in July, after government formation.

“The upcoming pre-election interim budget occurs at a juncture when the overall economic landscape appears stable. This is underpinned by the easing of financial conditions, robust macroeconomic data,” said Rajani Sinha, Chief Economist at CareEdge.

“Nonetheless, the current budgeting exercise is also confronted by economic headwinds like deceleration in the global economy, pressures in the agriculture sector, and strains on the rural economy,” Sinha said.

While the Indian economy has shown remarkable resilience since the Covid-19 pandemic, a large part of the growth has been driven by government expenditure on infrastructure and rural programmes, and on schemes aimed at boosting manufacturing.

There are still weak points. Rural wages have stagnated and demand has primarily been driven by the top 10 per cent of the population, mostly in urban centres. Job creation for millions joining the workforce every year remains the biggest challenge.

The clearest indication of what the upcoming budget might contain came from the Finance Minister herself. Speaking at a public event in December, Sitharaman said the budget will not have any “spectacular announcements”. This comes against the backdrop of PM Narendra Modi being on a stronger wicket, electorally, compared to 2019.

The expectation among analysts is that while the Finance Minister may not announce new flagship schemes, there could be an increase in expenditure on infrastructure projects.

Flagship schemes like NREGA and PM Kisan, and schemes related to housing, rural roads, food and fertiliser subsidies, health and education, could also see an increase in expenditure.

“There is a possibility of some reallocation of funds across various social development programmes and hence while the aggregate money spent would rise according to the budget size, there would be variations depending on the government’s priorities. In this context it would be interesting to see how the government looks at capex,” said Madan Sabnavis, Chief Economist, BoB.

In its pre-budget recommendations, the CII said Sitharaman should aim to increase capital expenditure outlay by 20 per cent to Rs 12 lakh crore, revise the beneficiary criteria for the free food scheme, and announce some pilot projects to test an urban employment guarantee scheme on the lines of NREGA. It also said the budget should move to expedite privatisation of PSUs, signal intent to streamline GST to a three-rate structure and announce measures to boost affordable housing.