central government and the upcoming budget is expected to be a populist budget. The middle class is expecting that there would be a rise in some tax exemption limits available under various sections like, Section 80C, Section 80D, Section 87A etc.
The Feb. 1 budget will be FM Nirmala Sitharaman’s last full-fledged one before national elections in 2024 and before elections in several large populous states that will be key tests for the ruling Bharatiya Janata Party (BJP).
The Indian government will borrow a record Rs 16 lakh crore ($198 billion) in the fiscal year to March 2024, according to a Reuters poll of economists, who said infrastructure spending and fiscal discipline ought to be its highest budget priorities.
The federal government’s gross indebtedness has more than doubled in the past four years as Prime Minister Narendra Modi’s government has spent heavily to cushion the economy from the effects of the COVID-19 pandemic and to provide relief to the poor.
“The key reason gross borrowing is going to be still quite high is the repayment burden,” said Dhiraj Nim, economist at ANZ. “The government borrowed a lot in the last few years to have funds for the pandemic, which means the repayment burden will now be quite elevated for several years.”
While economists in a separate Reuters poll forecast the government would bring the budget deficit down to 6.0% of GDP in 2023/24, it will still be well above the average of 4% to 5% seen since the 1970s and far from the target of reaching 4.5% by 2025/26.
The deficit is more than double what it was before the pandemic. Rising interest rates have increased the burden of repaying the borrowed money.
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