In a recent report by Goldman Sachs, it has been suggested that the Union Budget 2024-25 under Modi 3.0 will prioritize economic vision over stimulus measures. The report highlights that the budget is expected to make a significant statement about the long-term economic policy of the government, looking towards the year 2047. The focus is likely to be on job creation, support for MSMEs, services exports, domestic food supply chain, and inventory management.
The report emphasizes the importance of addressing price volatility through improved food supply chain management and incentives for domestic food production. It suggests investments in rural infrastructure, cold storage, and food processing to achieve this goal. Job creation is seen as a key priority, especially in labour-intensive manufacturing sectors like textiles, footwear, and toys. Support for MSMEs, which contribute significantly to output and employment in India, is expected to come in the form of credit, fiscal incentives, and skill development programs.
Furthermore, the report forecasts that the government will continue to focus on services exports by expanding Global Capability Centres (GCCs), Global Technology Centres (GTCs), and Global Engineering Centres (GECs). Despite some investor expectations for a shift towards welfare spending in the budget, Goldman Sachs suggests that there is limited fiscal space for major stimulus measures due to high public debt levels.
The report anticipates that the government will adhere to the fiscal deficit target of 5.1% of GDP for FY25, with potential further consolidation in the following years. It notes that while there may be some allocation towards welfare spending, the infrastructure upgrades in recent years have led to positive growth outcomes that policymakers are unlikely to abandon. The focus on capex and infrastructure development is expected to continue to drive growth, with limited room for extensive welfare expenditure.
Overall, Goldman Sachs projects that the Union Budget 2024-25 will reflect a long-term economic vision aimed at sustainable growth and development, with a cautious approach towards fiscal stimulus. The budget announcement on July 23, 2024, is awaited with anticipation to see how the government’s economic agenda unfolds in the coming year.
