- Wednesday, March 05, 2025
By: Shubham Ghosh
American multinational investment bank Goldman Sachs has said in a report on Tuesday (10) that the upcoming budget to be presented by India’s finance minister Nirmala Sitharaman on February 1 is unlikely to witness any major reform(s) and instead could see rise in allocation for welfare spending measures and capex and curbs in defence expenditure, the Hindu Bureau reported.
The 2023-24 budget will be the country’s final full-year budget before the Lok Sabha or general elections of 2024 and things are not going to be different from recent pre-election budgets, the report said.
“Given the general elections scheduled to take place in 2024, we expect the government to increase rural and welfare spending as seen in pre-election Budgets… Rural employment and housing are likely to be in focus,” it said.
Goldman Sachs said on the basis of analysis of pre-poll budgets over the last decade and half that there is typically a rise in capex allocation towards infrastructure, mainly roads and railways, and a slash in defence expenditure.
“In the case of current expenditures, we have typically seen an increased allocation towards rural spending or welfare schemes (mainly in education and healthcare),” Goldman Sachs said in the report on India’s fiscal outlook for 2023-24.
In the last full budget before the general elections of 2019, for instance, defence capital expenditure was cut from 36 per cent of total capex averaged in the previous four years to 32 per cent of the total capex; while infrastructure capex went up from 29 per cent averaged in the preceding four years to 40 per cent, it said.
Welfare spending rose from eight per cent of current expenditure averaged between 2014-15 and 2017-18, to 19 per cent of total current expenditure in the final full-year budget before the 2019 polls.
“This would be the final full-year budget under the current administration before the national elections in mid-2024, and comes at a time when the government is trying to weigh spending priorities, without compromising on fiscal prudence and the inflation target. We do not expect any significant reforms to be announced in this budget, but some measures to watch out for include: a) any details on incentives for ‘Make in India’, b) a roadmap on direct tax code implementation, and c) rationalization of subsidies, particularly fertilizers,” the report said.
