High stakes as India vows to present a Budget like 'never before'

 Total spending plan for next fiscal may surpass last year's Rs 30.4 trn, with focus likely on expanding a jobs guarantee program to cities and increasing allocation on education, housing, and health

India will turn to Finance Minister Nirmala Sitharaman’s budget 2021 on Monday to see how she prioritizes spending to get the pandemic-ravaged nation back to being the world’s fastest-growing major economy.

Sitharaman’s plan will likely rely on generous public spending to spur activity, putting more money in the hands of the average taxpayer to boost consumption and easing rules to attract investments when she presents the budget at 11 a.m. in New Delhi.

“Expectations are high, going into this budget,” said Samiran Chakraborty, an economist with Citigroup Inc. “Expenditure profile could move from survival to revival as the focus on infrastructure increases.”

That spending may continue to keep the fiscal deficit far wider than the 3 per cent of gross domestic product mandated by law. The budget gap for the year to March will probably be 7.25 per cent of GDP against a planned 3.4 per cent, according to a Bloomberg survey. The same poll shows the target for the next fiscal year will likely be 5.5 per cent.

Missing deficit goals will be the least of the worries for Prime Minister Narendra Modi’s government. It has to contend with creating jobs for the millions who lost their livelihoods to lockdowns to combat the world’s second-largest coronavirus outbreak, quelling protests by farmers against agriculture reforms and reviving growth in an economy headed for its biggest annual contraction on record.

India’s GDP will shrink 7.7 per cent in the year ending March, according to the statistics ministry. The Finance Ministry estimates GDP will likely expand 11 per cent next fiscal year, people familiar with the matter said, commenting on the forecast that will once again make India the world’s fastest-growing major economy ahead of China’s estimated 8.1 per cent pace.

A pickup in tax collections in recent months will offer some respite for Sitharaman, who will also seek to raise record amounts by selling state assets in the new financial year starting April after the pandemic all but ruined disinvestment plans in the current year. The exchequer will also earn a dividend from the central bank, which is expected to complement fiscal steps with monetary stimulus next month as inflation cools.