Narendra Modi’s Strategic Budget Approach for 2024/25: Balancing Infrastructure Focus and Fiscal Discipline
In a departure from the trend of hefty spending on new welfare programs ahead of general elections, Indian Prime Minister Narendra Modi is poised to unveil a budget for 2024/25 that prioritizes infrastructure development. Finance Minister Nirmala Sitharaman is expected to strike a balance, leveraging political messaging for inclusive growth while maintaining a conservative approach to spending.
Political Messaging and Fiscal Conservatism: Striking a Delicate Balance
Economists anticipate a budget heavy on political messaging, aligning with the Modi government’s theme of inclusive growth. However, the focus is likely to shift toward fiscal consolidation and continued emphasis on capital expenditure (capex). Striking this delicate balance will be crucial for the government’s pre-election strategy.
Targeted Welfare Measures: Doubling Payouts to Female Farmers
One anticipated move is doubling the annual payout to female farmers, potentially reaching 12,000 rupees, as a measure to attract women voters. Despite its political significance, the policy is expected to incur a relatively modest cost of $1.44 billion annually, aligning with the government’s measured spending approach.
Subsidy Control and Fiscal Deficit Reduction
The government is poised to keep major subsidies in check, maintaining them at the current year’s level of around $48 billion for the upcoming fiscal year. Simultaneously, there is a plan to reduce the fiscal deficit by at least 50 basis points in 2024/25, showcasing a commitment to fiscal discipline amid election dynamics.
Infrastructure Spending Amidst Youth Unemployment Concerns
Despite opposition criticism regarding high youth unemployment, the government is expected to continue substantial spending on infrastructure projects. The strategy aims to draw foreign and domestic manufacturers through incentives, fostering economic growth with a long-term perspective on job creation.
Election-Year Temptations and Modi’s Political Capital
While being a general election year might tempt the ruling Bharatiya Janata Party (BJP) to announce significant fiscal giveaways, recent state election victories and Modi’s popularity suggest a strategic approach. The government appears poised to balance short-term political needs with its long-term ambition of reining in the fiscal deficit.
Conclusion: Modi’s Growth-Focused Budgeting Strategy
As India enters a crucial election year, Modi’s budget strategy underscores a commitment to growth through infrastructure development. While navigating political landscapes, the government’s emphasis on fiscal discipline signals a reliance on Modi’s popularity and past electoral successes, demonstrating a nuanced and strategic approach to budget planning.
