Finance Minister Nirmala Sitharaman is likely to list out steps to boost consumption while keeping inflation in check when she presents the Interim Budget on February 1.
Women and marginalised communities are also seen getting additional sops as part of Sitharaman’s effort to rev up the consumption story ahead of the general elections, experts said.
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Interim Budgets usually do not contain fresh tax proposals or new schemes. Experts believe one way boost consumption is to put more money in the hands of people, and one of the possible ways of doing it is by reducing the tax burden through tinkering with tax slabs or increasing the standard deduction.
Another proposal is related to increasing the funds under the rural employment guarantee scheme MGNREGA and higher payout for farmers.
In the interim Budget, the government will seek permission from Parliament to meet its expenses for 4 months of the 2024-25 fiscal. It may contain proposals to address immediate economic problems, which cannot wait 4 months when the full budget is presented after the formation of the new government.
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According to experts, there is an urgency to address the issues concerning slack consumption demand in the economy. Deloitte India Partner Rajat Wahi said that in the case of FMCG and most of the products people consume on a daily basis, consumer goods companies have increased the prices in 8-10 quarters mainly due to an increase in input costs.
”So, global supply chain impact, input prices going up, inflationary impact, interest rates going up, all of this is impacting the lower income. It’s not only rural, it is the poor segment of urban areas where are seeing these issues,” Wahi said.
Wahi said the bigger impact of the price rise is being felt by the poorer section of society as the number of loan defaults has significantly increased, he added.
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”The agriculture growth has not been what the government had anticipated. The plan was to double agri income, we haven’t seen that come through as yet because of inflation,” Wahi added. According to advance estimates of GDP, the agriculture sector growth is expected to decelerate to 1.8 per cent in the current fiscal from 4 per cent in 2022-23.
India Ratings & Research Chief Economist Devendra Kumar Pant said the main purpose of a vote-on-account is to allow the government to spend money on salaries, wages, interest payments, and debt services for four months of the next fiscal. ”But, if there is a certain section of society which is under stress, can we wait for 4-5 months to take any action? If in 5 months, if we don’t do anything, the situation may turn from bad to worse. There may be some intervention for certain vulnerable sections (in the interim Budget),” Pant said.
