Home Business ‘Subsidies to drive growth till general elections, private investment to take off...

‘Subsidies to drive growth till general elections, private investment to take off after polls’


India’s spending on subsidies and the rural employment guarantee scheme are expected to rise ahead of the Lok Sabha elections possibly at the expense of public capex outlays, while private investments are likely to rebound after the 2024 ballot, Goldman Sachs said in a report on Monday.

The firm’s India 2024 Outlook report forecasts that the Reserve Bank of India may cut interest rates only towards the end of 2024 and early 2025, in two tranches of 25 basis points each, as inflation will remain elevated at about 5.1% through next year from an estimated 5.7% this year, limiting the room for monetary easing.

“The pivot towards subsidies and welfare spending going into the elections is likely to continue, though given the fiscal constraints… we don’t expect the government to increase the fiscal deficit. Thus, we think that a decline in public capital expenditure will have to share the burden of fiscal consolidation, among a reduction in other current expenditure,” Goldman Sachs’ economic research team projected.

As per the firm, growth may ease a tad from 6.4% in this calendar year to 6.3% in 2024, but it is likely to be “a tale of two halves”. “Subsidies and transfer payments as we head into the general elections in Q2 2024 [April to June] will likely be the consumption and growth driver in the first half. Post-elections, we expect investment growth to re-accelerate, especially from the private side,” it averred.

The firm expects 6.2% real GDP growth in 2023-24 to rise to 6.5% in 2024-25, with risks around the growth outlook “evenly balanced” and “the main domestic risk emanating from political uncertainty with elections”.

“With the general elections approaching in Q2 2024, we have already seen increased allocation towards the rural employment program, higher cooking gas subsidies and an extension of the food subsidy program from the Central government, apart from a spate of fiscal outlays from State governments before the State elections in November-December,” it noted.

Source link

Previous articleRBI approves Hinduja directors on Reliance Capital board
Next articleSuryakumar Yadav named skipper, Shreyas Iyer rested for first three Australia T20Is | Cricket News – Times of India


Please enter your comment!
Please enter your name here