The nation plans to raise the spending on infrastructure in the annual budget next week to set the economy on solid footing, but the fiscal constraints on the economy leave a little room for concession for households who have gotten hurt during the COVID-19 pandemic in the last two years, as per the officials
India is expected to expand 9.2 per cent in the current fiscal year which will end in March, following the reduction of 7.3 per cent in the previous fiscal year. 55 per cent of the GDP (Gross Domestic Product) that comes from the private consumption sector is below pre-COVID levels amid the increasing levels of debts related to households, on the other hand, retail prices have surged nearly a tenth ever since the Coronavirus pandemic in the early parts of 2020.
The Budget for this fiscal year which is due to be presented on February 1, 2022, comes days before the elections in five poll-bound states such as Punjab, Uttar Pradesh which could push the finance minister, Nirmala Sitharaman to promise increased spending on the rural sector and subsidies on food and fertilisers.
Although these spendings are most likely to be obliterated by the spending to reinforce transport and healthcare infrastructure of the nation which has been estimated to rise between 12 to 15 per cent this year according to the experts and analysts. The focus this year will be on reviving the Indian economy through higher investments while trying to keep the corporate and individual taxes stable. Reviving growth is a priority as per the officials.
The Finance Minister could boost incentives that are tied to production in more industries to attract investments that will lead to the creation of jobs and the spur in growth. The Central government is also likely to increase the capital expenditure by 25 per cent and is expected to make budgetary allocations for roads, highways and railways. The other two areas that could see more production-linked incentives are food processing and exports.
According to senior officials, no major budget changes are likely to be implemented on individual and corporate taxes because the government debt is rising and private investment is subdued. Further slashes of taxes in the corporate sector are expected after the government slashed them in 2019 making it one of the lowest in Asia. The Indian Economy is also facing the risk of an increase in interest rates.
The government will step up the spending but it will ensure the sticking to the long term goals of fiscal consolidation as per the officials. Due to the political pressures, major steps are highly unlikely in the Budget Session to be held next week. The union government is also not likely to set ambitious targets for privatisation after missing the targets for three years in a row because of the administrative obstacles and the pandemic.