Officials said India plans to increase spending on infrastructure in its annual budget next week to bolster the economy, but financial constraints leave little room for concessions for families hit by the pandemic.
Asia’s third-largest economy is projected to expand by 9.2% in the fiscal year ending March, after a 7.3% contraction in the previous fiscal year.
Yet private consumption, which accounts for about 55% of GDP, remains below pre-pandemic levels amid rising household debt, while retail prices have risen by about a tenth since the COVID-19 outbreak in early 2020 Is.
The February 1 budget comes days before the start of elections in five states, which may prompt Finance Minister Nirmala Sitharaman to promise higher rural spending and subsidies on food and fertiliser.
Yet spending is likely to be spent on scaling up the transportation and healthcare network, which analysts predict could grow between 12% and 25% in the next fiscal year.
“We will focus on reviving the economy through higher investment, while keeping personal and corporate taxes stable,” said an official on condition of anonymity, adding that reviving growth would be a priority.
Ms Sitharaman may also promote production-linked incentives in more industries, to attract investments that create jobs and drive growth.
Sonal Verma, analyst at Nomura, said in a note, “Continuing with the capex, we expect a further 25% increase in capital expenditure by the central government…we have increased the budgetary allocation for roads, highways and railways. Let’s hope.”
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