The Minister of Finance in India faces a difficult option – increased growth or reduced deficit

While the Indian government is moving a narrow rope between financial wisdom and revival growth, experts suggest that it will likely reduce the deficit in its annual budget over spending that aims to the third largest economy in Asia in Asia.

Economists at the UBS Investment Bank said that the fiscal year ending in March 2026, the Indian government can reduce the goal of the financial deficit by 50 basis to 4.4 % of the country's gross domestic product from the target of 4.9 % for the current fiscal year.

They also expected the government to determine the goal of growth of GDP 10.5 % for the next fiscal year.

Indian Finance Minister Nermalla Setharman will offer the national budget on February 1, while it will be the first budget of the first coalition government after her assumption. Power in June.

The budget comes against the background of slowing growth in the fifth largest economy in the world, poor domestic demand, rupees decrease in decline and high global doubts.

The slowdown in the economy is largely attributed to factors such as Northern rainfall, financial tightening The growth of lukewarm credit in the private sector, as the central bank has taken steps to reduce the growth of unanimous lending.

Goldman Sachs said that the budget is likely to reaffirm job growth in the intensive manufacturing sector in employment, while strengthening rural housing programs and additional steps to control price fluctuations.

With domestic consumption and economic activity, the budget may focus on “formulating current measures and increasing medium -term demand,” said Radika Rao, senior economists in DBS.

“The tax exemption (also) reduces this list … although the reduction in personal income tax rates or standard exemption will affect a small part of the population, it is possible that there is some support in the pipeline,” Rao added.

She said that to give consumption a boost, the central government is expected to reduce the personal income tax for medium income families, while continuing to give priority to spending on infrastructure, and promoting country roads, railways, airports and highways.

After the height to 9.2 % of GDP during the epidemicThe Indian government has steadily reduced the budget deficit in recent years, a major demand for the country to win the credit rating.

Global S&P Classification I grew up in the sovereignty of India's sovereign classification To “positive” from “stable” while maintaining credit classification in the country in “BBB-“- The lowest investment level – Quoted from strong economic expansion and political commitment to financial unification.

The Minister of Finance pledged in Budget letter in July to narrow the deficit To 4.9 % in the current fiscal year, and 4.5 % next fiscal year. “From 2026-27 onwards, our endeavor will be to maintain the financial deficit every year so that the debts of the central government are in a way to a decrease as a percentage of GDP,” she said.

The government is expected to achieve a deficit of less than 5 % in the current fiscal year, partly Thanks to standard distributions of $ 25 billion From the central bank. Economists in Nomura partially attributed it to a “sharp deviation” in capitalist spending.

Over the past seven years, the Indian government has been constantly decreased to the full benefit from the expenses listed in the budget and approval through supplementary grants, using about 80 % of the total funds available every year, according to Goldman Sachs account. She said that this deficiency was narrowed after birth, when the government overcame the support expenditures listed in the budget to cover the high prices of food.

The Investment Bank expected the government's public expenses to shrink in the coming years, which slows down to 3.2 % of GDP in the fiscal year 2025-26.

She said that this financial discipline “will continue to be a drag in the coming fiscal year,” which indicates that “the fastest growth in the public deep is behind us … in general, there is no great room for increasing spending on social welfare.”

the world The fastest growth economy It has seen the shrinkage of growth. India has reduced the real GDP predictions for a full year after economic growth I missed expectations In the quarter ending in September, when it grew by 5.4 % – the slower expansion in nearly two years.

The government has reduced the forecast for economic growth for the current fiscal year to the slower level in four years, after three rounds of discounts 6.4 % earlier This month From 7.2 % In October.

For the next fiscal year, Nomura analysts said that the government may determine a growth goal in GDP by 10.3 %, up from 9.7 % for the current fiscal year ending in March 2025.

However, the hope that Sitharaman will provide a large financial package to get the economy out of the last soft correction in the next budget that is likely to disappoint.

Shah added that some “comfortable taxes and additional spending on cards” are likely to be “gradual.”

Consumer prices in India inside the ceiling of tolerance with the central bank decreased by 6 %, Next In 5.22 % in December and 5.48 % in November – It violated the upper limit in October – RBI provided some space to lower prices.

Tanvi Gupta Jain, the chief economist in India in UBS, said RBI faces a “difficult choice”, adding that she expects a “shallow cash relief cycle” about 75 basis points, which begins the February Policy meeting.

However, the central bank said last month that the monetary conditions may remain tight for some time while considering more inflationary pressures.

India monitors were also running Tenerhooks on possible procedures By President Donald Trump, who put forward the idea of ​​global definitions during his campaign trail.

With trade An excess of approximately $ 42 billion with the United StatesIndia faces the increasing scrutiny under Trump's policy to focus on reducing the trade deficit.

The framework of the American commercial policy under Trump's second presidency can enhance the dollar and the treasury, making US interest rates high for a longer period. this The complexity of political decisions for central banks in Asia, Including RBI, as increased growth by reducing policy would mean expanding average difference.

India looks forward to CUT goals not to invest and set assets By 40 % – or to less than 300 billion rupees (3.47 billion dollars) from 500 billion rupees – for the current fiscal year, local media reported the economic times earlier this month.

Jin: Jane said that Divestment receipts are “late this year” and amounted to 90 billion rupees compared to the government's budget estimation of 500 billion rupees.

It expects the government to reduce the target “about 300 billion” rupees for the next fiscal year.