NEW DELHI: When India’s annual budget is presented to parliament, the government will seek to reduce its financial deficit while offering incentives for investment and increasing state spending to support an economy that is experiencing a global slowdown.

Although the government faces elections in key states this year and a national vote in 2024, the budget is unlikely to offer major relief to households due to financial constraints, officials said, while noting that the budget would focus on long-term growth.

Since taking charge in 2014, Prime Minister Narendra Modi has ramped up capital spending, including on roads and energy, while wooing investors through lower tax rates and labour reforms and offering subsidies to poor households to clinch their political support.

Finance Minister Nirmala Sitharaman is widely expected to continue that policy and announce a 10% to 12% increase in budget allocations for health, education and rural projects, helped by a pick-up in tax collections.

“The annual budget will continue economic reforms,” said Gopal Krishna Agarwal, economic affairs spokesman for Modi’s Bharatiya Janata Party.

“The easing of retail inflation, higher state spending and growing bank credit would help the economic recovery ahead of the national elections,” he said.

Critics, on the other hand, claim that Modi’s economic policies have primarily benefitted large corporations while increasing the tax burden on middle-class families, who are now facing lower growth in both real income and employment.

The finance ministry’s annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% year-on-year in the next financial year, down from the 7% projected for the current year, while warning about the impact of the global slowdown on exports.

“India’s growth outlook seems better than in the pre-pandemic years, and the Indian economy is prepared to grow at its potential in the medium-term,” the report said.

The International Monetary Fund predicts that India’s economy will grow by 6.1% in 2023 and 2024, down from 6.8% in the current financial year.

 - Reuters