Interim Budget 2024: Govt Likely To Focus On Boosting Welfare Spending

Leading brokerage firm Jefferies said that the government is likely to emphasize on enhancing welfare spending in the upcoming interim budget scheduled to be announced later this year on February 1, 2024 thus building the momentum for the crucial Lok Sabha polls to take place this year.

Jefferies said that the imperative for welfare scheme appears to be high. The foreign brokerage stated that the income transfer policies and several welfare schemes played a key role in recent campaigns as the Bharatiya Janata Party (BJP) alignin with some of these promises.

As per the analyst, the projected cost of these schemes at the state level will be nearly 150-200 basis points of GDP.

Jefferies noted that the Budget ahead of the 2019 elections highlight key welfare schemes, that included income transfers to farmers. "Prior to the 2019 elections also the Budget had carried large welfare scheme in the form of income transfers to farmers," said the analyst.

As the polls are just a few months away now, Jefferies feels that the interim budget is likely to introduce a large new scheme or expand famous BJP schemes like the 'Housing for All' and health insurance. Furthermore, government's annual cash transfer scheme of Rs 6,000 per farmer may see an surge.

Jefferies believes a 7-8% surge in the government's social spending (excluding subsidies) in FY25as against the 3% rise in FY24.

As the central government's capital expenditure (capex) nearly tripled over the past five years, soaring an all-time high of 3.3% of GDP in FY24, the analyst anticipates limited incremental growth in FY25.

The pressure to increase welfare spending amid fiscal consolidation may lead to a search for revenues. While immediate tax hikes are not expected, post-election measures such as higher capital gains tax are possible, added Jefferies.

The analyst also expects a significant ramp-up in disinvestment post-elections, capitalising on the strong surge in Public Sector Undertaking (PSU) stocks, especially in sectors such as railways and defence.

"Disinvestment may also get ramped up post elections, partly as the government capitalises on the sharp run in PSU stocks in sectors such as railways and defence," concluded Jefferies.

Meanwhile, PM Modi on Monday asked citizens to share feedback about India's progress through the Jan Man Survey on NaMo app. "What do you think of the progress achieved by India in various sectors in the last 10 years?" Modi asked on X (formerly Twitter).

The survey was hosted on the Narendra Modi app (known as "NaMo app") powered by supporters & fans of PM Modi, volunteers & grass-root workers.

It is worth noting that the survey includes 14 questions about PM Modi government's performance, user's local parliamentarian's performance, and whether or not the user would vote for the BJP in the upcoming general elections. All fourteen questions are compulsory.