Pre-Budget Expectations from Union Budget 2019: Since this is an election year, there are chances that the Modi government would go for higher spending.
India Union Budget 2019 Expectations: Modi government’s last budget before the Lok Sabha polls 2019 will be a “important” one despite being an “interim” one, according to a HSBC Global Research report. The central government is expected to meet the Financial Year 19 target but likely to miss the FY20 one in the Budget 2019, the HSBC report states. The report says that a new package to address farmers’ issues and assistance for small businesses are likely to feature in Finance Minister Piyush Goyal’s budget speech. The central government’s announcements in Budget 2019 will have an impact on the upcoming monetary policy action, the HSBC report adds.
Since this is an election year, there are chances that the central government would go for higher spending. However, there are palpable concerns regarding the slow growth, the HSBC report says. The Modi government’s Budget 2019 ahead of Lok Sabha elections 2019 holds importance as it gives a sense of the likely fiscal package if the current government were to remain in power. Besides this, it also provides a template that any new government could use, the HSBC report says.
The HSBC report says that the Central government is expected to meet the 3.3 per cent of GDP fiscal deficit target. However, there are risks of slippage due to a shortfall in GST, excise and income tax revenues, as well as spectrum sale proceeds, the report says. In Budget 2019, the government will have an option to dip into the Goods and Services Tax (GST) cess fund and cut the expenditure.
The government is expected to announce some form of rural direct cash support given recent evidence that such support is more likely to help the intended beneficiaries than other forms of support. Rural incomes and small businesses to be the key themes for FY 20, the HSBC research report. The Modi government may also announce a number closer to 3.3 per cent for FY20 instead of the pre-announced fiscal deficit target of 3.1 per cent. The research report says that net borrowing by the central government is likely to rise faster than nominal GDP growth.