Opinion: Budget 2024 - What To Expect From PM Modi

PM Modi's core economic agenda is to promote India as a rival manufacturing destination to China. He has sought to achieve this by incentivizing private factory expenditure and allocating more state resources to infrastructure, particularly rail and road.

Given that it's his last, big spending opportunity before next year's general elections, it won't be unreasonable to expect Prime Minister Narendra Modi to sprinkle the Feb. 1 government budget with a dose of populism. This is especially so, as Rahul Gandhi, his main political opponent, is on a grueling months-long trek, walking from the edge of the Indian Ocean in the south to Kashmir in the northern Himalayan region, trying to whip up passion around everyday issues like unemployment and inflation.

Yet, the budget might at best pander to the middle class by some cosmetic tinkering with income-tax slabs. I'll be surprised if the administration suddenly decides to push mass consumption by diluting its single-minded devotion to investment. An expansion of the welfare state - better old-age security and higher maternity benefits, for instance - is equally unlikely, even though it will help PM Modi counter Gandhi's accusation that his government is working only for a few rich tycoons, such as Gautam Adani and Mukesh Ambani, two of the the world's wealthiest people.

The global economy is slowing. The US Federal Reserve is determined to wring inflation dry. China's aggressive reopening is likely to put some pressure on raw-material prices. And Japan appears to be losing control of its hyper-easy monetary policy. Against this backdrop, India will be hesitant to make costly commitments. Even with a bumper tax harvest - thanks to faster-than-expected domestic inflation - the federal government will just about meet its targeted budget deficit of 6.4% of gross domestic product for the fiscal year that ends on March 31.

To that, add state-level resource shortfalls, power distribution utilities' chronic losses, an expected 3%-plus of GDP in current-account gap, and a sticky 6% core inflation - India's macroeconomic imbalance is already among the worst across major economies. The good news so far has been high post-Covid-19 growth. That's now slowing, partly because export demand is starting to wobble and partly because the central bank in Mumbai has also had to raise interest rates. A focus on stability may serve India better than a desperate priming of the fiscal pumps.