The recent budget presented by the Modi government in India is politically confident, with a focus on fiscal prudence and an aim to encourage more investment from India Inc. The budget, presented as a vote-on-account, sends a strong message of confidence in the government’s return to power. However, it also includes a surprise announcement of a high-powered committee to study demographic changes, indicating that there may be other considerations at play.
In terms of fiscal policy, the government has made efforts to pull back from high levels of debt and deficit, with the fiscal deficit for 2023-24 being brought down to 5.8% of GDP. However, there are questions about the capacity to absorb the high levels of capital expenditure, as well as unresolved issues in the tax system, such as capping rising amounts under dispute.
The budget also points towards the government’s future fiscal plan, which includes banking on tax buoyancy, slashing subsidies, and keeping up capital spending in order to lower gross borrowing in the next fiscal year. The aim is to encourage private sector investment, but the question remains whether India Inc. will respond. The ball is now in their court.
Overall, the budget bet on India Inc. investing more, but the question remains whether this will actually happen. The political confidence of the government is evident, but only time will tell if their fiscal and economic strategies will yield the desired results.