INTERIM BUDGET WON'T SPRING SURPRISES

A confident government may decide not to rock the fiscal boat despite impending elections.

- JOE C. MATHEW

ON NOVEMBER 27, Finance Minister Nirmala Sitharaman talked about the outcome of Lok Sabha elections that are likely to be held in May 2024. “Prime Minister (Narendra) Modi is coming back and coming back with a good majority,” she said in an assurance to the investor community, which prefers continuity in policies of countries where they invest. She was delivering a keynote speech at the inaugural of India Global Forum’s annual meet in Dubai.

The same day, S&P Global Ratings raised India’s gross domestic product (GDP) growth forecast for FY24 from 6% to 6.4% saying robust domestic demand is offsetting headwinds from inflation and weak exports. Quarterly GDP estimates released by Ministry of Statistics and Programme Implementation three days later supported the view— GDP rose 7.6% in JulySeptember, much higher than all forecasts, including RBI’s 6.5%, though the bi-monthly monetary policy statement of RBI on December 8 forecast 7% GDP growth in FY24.

Promising economic indicators and the ruling party’s confidence that it will return to power amid sluggish global economy can influence interim Budget for FY25. The stronger its belief in winning next general elections, the lesser the chances of the interim Budget becoming an all out exercise to woo voters. Similarly, the stronger the economic outlook, the lesser the chances of government ignoring fiscal discipline while preparing revenue and expenditure estimates for FY25. At least that is what conventional wisdom suggests.