Budget 2024: Government Should Balance Fiscal Prudence with Job Creation, Say Analysts

The union government will not completely pivot towards welfare spending as the focus on fiscal consolidation from capital expenditure will continue to remain unchanged, according to brokerages.

There is limited fiscal space to stimulate the economy given high public debt to relax the fiscal consolidation path, Goldman Sachs said in a July 8 report. "Limited fiscal space and prevailing infrastructure upgrades will emphasise the government's fiscal consolidation path."

The brokerage expects the government to stick to its 5.1% fiscal deficit target for fiscal 2025 and consolidate it further in financial year 2026.

Finance Minister Nirmala Sitharaman will present the Union Budget 2024–25 on July 23.

The government should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, SBI Research said in a report. However, the policies will refrain from obsessing too much over the fiscal stance, as it may come in the way of a long-term sustainable growth path, it said.

The estimated decline in both gross and net market borrowings in FY25 should also serve as an enabler for fiscal consolidation, according to SBI.

Higher welfare spending may not require a reduction in capex given the higher-than-expected dividend transfer from the central bank, Goldman Sachs said.

Goldman Sachs sees an emphasis on job creation through labour-intensive manufacturing, credit for MSMEs, continued focus on services exports by expanding GCCs, and a thrust on domestic food supply chain and inventory management to control price volatility.

The budget is also likely to lay out a path for the future of public finance in India through a roadmap for public debt sustainability and green finance, Goldman Sachs said.

The agri and allied sectors need a few unconventional yet rewarding "Big Bang approaches", SBI said. It said that a separate PLI scheme for MSMEs should boost the sectoral contribution further, given that they contribute around 45% of exports and around 40% of manufacturing GVA.