Modi to bet on growth in budget amid global risks: What to watch

Core Viewpoint - The Indian government's upcoming budget is expected to prioritize job creation and economic stability amid global uncertainties, with a focus on infrastructure spending and fiscal consolidation [1][2][4]. Employment and Growth - The budget is anticipated to emphasize employment support and growth initiatives, with increased spending on infrastructure such as roads, ports, and railways, alongside reforms in the import-duty regime [2][3]. - Economists project India's economic growth to be between 6.5% and 7% for the next fiscal year, with inflation expected to align with the central bank's target of 4% [8]. Fiscal Deficit and Debt - The fiscal deficit is projected to decrease to 4.2% of GDP in the upcoming fiscal year, down from 4.4% in the current year, as the government aims to adhere to fiscal consolidation [4][6]. - India's general government debt is estimated to reach 81.29% of GDP by March 2024, a significant increase from 69% in 2015, primarily due to pandemic-related borrowing [7]. Revenue Generation - The government anticipates net tax revenues of 28.3 trillion rupees (approximately $308 billion) and an additional 500 billion rupees from disinvestment [9]. - Corporate and income tax collections will need to increase by 11.7% and 43% year-on-year, respectively, to meet budgeted targets [10]. Capital Expenditure - Capital expenditure is expected to be a focal point, with an allocation of about 12.04 trillion rupees, nearly 3% of GDP, although concerns about reaching saturation in large infrastructure projects have been raised [12]. - Defense-related capital spending is projected to rise to 2.3 trillion rupees, reflecting ongoing border tensions [13]. Market Borrowing - The government is likely to engage in record bond borrowing, with gross market borrowing expected to reach 16.5 trillion rupees and net borrowing at 11.6 trillion rupees [14].