By Shivangi Acharya
NEW DELHI (Reuters) – Indian Prime Minister Narendra Modi faces the challenges of reviving growth and giving relief to a middle class hit by rising living costs, while also preparing for an uncertain year of global trade, when his government unveils its budget on Saturday.
Finance Minister Nirmala Sitharaman will present the budget for the next fiscal year in parliament at 0530 GMT.
She may provide a policy boost for the world’s fifth-largest economy, which is expected to post its slowest pace of growth in four years, amid frail urban demand and inflation risks fuelled by a weak currency.
The slowing economy has rattled the equity market and led to more Indians becoming less hopeful about their quality of life under Modi’s rule.
Economists expect the budget to ease the burden on individuals through tax cuts on income and energy products and to build on the $24 billion programme of job creation schemes announced in the first post-election budget in July.
DEREGULATION DRIVE
Speaking before the start of Friday’s parliamentary session, Modi said the budget “will give new faith and trust” to the country, without giving any hints of the steps that would be taken to shore up economic growth.
“We expect the government to unveil targeted growth-supportive fiscal policies, with minimum disruption to the fiscal consolidation roadmap,” said Sonal Varma, economist at Nomura.
The government is expected to slightly better its fiscal deficit target for the current year, while lowering it to below 4.5% in the coming year that begins on April 1.
The country’s chief economic advisor, in a report released on Friday, forecast India’s economy would remain sluggish in the next fiscal year and advocated long-delayed reforms in areas such as land and labour to boost medium-term growth.
While near-term growth is in line with the 10-year average, India needs a growth rate of 8% to meet its longer term economic goals and create enough jobs for its large, youthful population.
For this, Indian states, along with the centre, must pursue systematic deregulation as a priority, the survey said. Areas in which regulations need to be eased range from land to labour and factories, it said.
India lags its own target to be a $5 trillion economy by 2025. Modi aims for the nation to be a developed economy by 2047.
BRACING FOR TRUMP’S TARIFFS
India will also have to cope with possible global disruptions from U.S. President Donald Trump’s trade policies. India is trying to preemptively lower tariffs on goods to save itself from Trump’s threatened tariffs.
To align with Trump’s “America First” policy, Reuters reported India was ready to offer more incentives such as tax cuts and land access to U.S. companies in industries such as semiconductors and electronics.
Modi is expected to discuss these issues with Trump later in February.
The lowering of tariffs on some of the goods could be part of the budget too, with India seeking to take advantage of U.S.-China trade tensions to increase its own share of global supply chains.
The list is likely to include components for mobile phone assembly such as printed circuit board assembly, parts of camera modules, and USB cables, sources have said.
(Editing by Alex Richardson)
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