Budget Squeeze: Poll Predicts Tighter Spending Despite Slowdown

28 Jan 2025 , 09:43 AM

Despite a severe economic downturn, the Indian government will continue to meet the borrowing and expenditure goals it announced in its February 1 budget, according to a Reuters poll of analysts, placing the burden of growth support on the Reserve Bank of India.

When compared to the fiscal year that is about to conclude, which had a fiscal deficit of 4.8%, an anticipated fiscal deficit of 4.5% of GDP indicates a minor tightening of the purse.

More proof that the government’s efforts to stimulate private investment and job creation with infrastructure have not produced long-lasting results comes from the fact that growth in Asia’s third-largest economy fell to 5.4% in July-September from an average of around 8.0% last fiscal year.

Household consumption has been constrained by the lack of well-paying jobs in a nation of almost 1.4 billion people, the bulk of whom are under 30.

There are still hopes that the government will reduce income tax, which is paid by a very small portion of the population, and increase expenditure on agriculture, which employs almost half of the workforce.

According to a Reuters survey conducted from January 22–27, economists predicted that New Delhi would maintain its budget deficit target of 4.5% of GDP, with median projections for gross borrowing of 14.28 trillion rupees ($165.53 billion).

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