Desperate for five more years in power, Narendra Modi's government will woo rural and urban middle-class voters with farm relief measures and tax cuts, said officials privy to plans for the final budget before a general election, reports Reuters.
Stung by opposition victories in three state polls last month, and needing to call a national election by May, the Indian Prime Minister is facing growing discontent over depressed farm incomes and doubts over whether his policies are creating enough jobs.
The electoral compulsions mean that major economic reforms, such as tax cuts for bigger companies and plans to bring down the budget deficit, could be put on hold at least until after the election, the sources said.
Piyush Goyal, India's interim finance minister, will present the budget on February 01, in the absence of Finance Minister Arun Jaitley, who is currently in US for medical treatment.
The higher spending, along with a shortfall in tax collections, will push the fiscal deficit up to the equivalent of 3.5 per cent of gross domestic product (GDP) for the year ending in March, overshooting a previous 3.3 per cent target, according to one of the sources with direct knowledge of budget discussions.
That would fit with the expectations of a Reuters poll of economists.
The source said there was a chance that the government could take corrective action in March, hoping that by that time the election schedule will be settled and the public focus will shift towards campaigning.
"We may resort to spending cuts in March to contain the fiscal deficit," the source said.
The finance ministry had cut capital and other spending amounting to 750.8 billion rupees ($10.55 billion) in the last financial year ending in March 2018. But Modi's government has been stepping back from such fiscal rectitude in recent months.
In its desperation to find ways to pay for pre-election spending, the government has also pressed the central bank to part with more of its reserves, causing a rift that culminated in the resignation of the bank's governor last month.
"This is an election budget, and most of the economic reforms have been put on hold," said another official, adding the government could defer any decision on business demands for a cut in corporate tax.
© 2024 - All Rights with The Financial Express
