Union Budget likely to test Modi's fiscal resolve

India will unveil its budget Wednesday, testing Prime Minister Narendra Modi's fiscal mettle seen as key to boosting investor sentiment even as it will likely leave less room for handouts a year before he seeks a third term.

Modi, who rides an enduring wave of popularity as his second term is coming to a close, looks poised to sustain fiscal consolidation as he takes the global stage with India's presidency of the Group of 20 nations. Shrinking the deficit which hit a record 9.2% of gross domestic product during the first year of the pandemic is necessary for Asia's third-largest economy to improve its credit rating currently at the lowest investment grade.

India recently restructured the world's biggest food program and trimmed energy subsidies to enable about 1 trillion rupees ($12.3 billion) in government savings. A Bloomberg survey this month of more than 20 economists showed that the majority expects the budget from the fiscal year starting April to steer clear of populist measures and focus on strengthening manufacturing and creating jobs.