Union Budget should be looked with long-term perspectives, beyond numbers: Goldman Sachs
Jul 09, 2024
New Delhi [India], July 9, : Putting forth a perspective on the expectations of stakeholders of the Indian economy from the July Union Budget, global financial institution Goldman Sachs says that investors should look beyond the fiscal numbers in Finance Minister Nirmala Sitharaman's budget.
Goldman Sachs in its report titled, India's Fiscal policy: Union Budget Preview: Beyond the numbers, said this year's budget should be looked beyond just the fiscal numbers, Indian economy should be looked at with a long-term perspective.
"We advise investors to look beyond just the fiscal numbers in this budget. We think the government will use the budget as an opportunity to make a big-picture statement about the long-term economic policy vision over the next several years, rather than minor stimulus announcements. These are likely going to align with the government's development agenda for 2047"
The report further says India has limited fiscal space available, and even if we see some expenditure allocation towards welfare spending, it may not require a reduction in the capex given the higher-than-expected dividend transfer from the RBI last month.
The report says July budget is likely to give a push to key areas like rural economy, job creation through labour intensive manufacturing and support to MSMEs in form of credit or fiscal incentives.
A thrust on domestic food supply chain and inventory management may be announced to check inflationary trends. This is likely to happen through enhancing rural infrastructure for better connectivity.
The report added that the government will target job creation through labour-intensive manufacturing sectors, such as textiles, footwear, and toys, by integrating them into global value chains.
The budget announcements will also focus to address the education gap, vocational programs, and on-the-job training will be emphasized for rapid skilling of workers, the report added.
The investment banking firm further added that the upcoming budget is expected to outline a comprehensive plan for the future of public finance in India. This plan will include two key elements: a roadmap for public debt sustainability and a strategy for green finance. The roadmap for public debt sustainability will address how India can manage its public debt in a sustainable manner, ensuring fiscal stability and long-term economic health.
The green finance strategy will focus on the role of public finance in balancing India's energy security with its transition to more sustainable energy sources. This involves investing in renewable energy and other green initiatives while ensuring that the country's energy needs are met.
By addressing both these aspects, the union budget aims to create a balanced and forward-looking financial framework for the country, the report anticipated.
Goldman Sachs says that the budget will continue to prioritise high-quality service jobs by expanding Global Capability Centres (GCCs), Global Technology Centres (GTCs), and Global Engineering Centres (GECs). However, the report cautioned that with a reduced political mandate, more political capital will be necessary to implement crucial structural reforms, including land and farm sector reforms.
