Union Budget to Enhance Welfare Spending, Encourage Deposit Inflows

Higher spending on welfare schemes to boost sluggish consumption growth will be a key focus in the upcoming Union budget, a domestic rating agency stated on Tuesday. The budget aims to stimulate consumption by increasing allocations for the rural economy, welfare schemes, and agriculture, according to Care Ratings.

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The agency highlighted that welfare schemes might see a significant rise in allocation, predicting a Rs 75,000 crore increase in revenue expenditure compared to the interim budget earlier this year. The government is anticipated to allocate more funds to employment guarantee programmes, PM Awas Yojana, PM Gram Sadak Yojana, PM Kisan Samman Nidhi, and schemes for labour-intensive small businesses.

Focus on Rural Economy and Welfare Schemes

Despite the increased spending on welfare, the government is expected to reduce the fiscal deficit target to 5 per cent for FY25 from 5.1 per cent in the interim budget. The agency noted that the budget might also explore ways to incentivise deposit mobilisation for banks due to the ongoing gap between deposit and credit growth.

Care Ratings mentioned that even with higher allocations for welfare schemes, the government's long-standing focus on capital expenditure is likely to continue. The government is expected to maintain its Rs 11 lakh crore spending commitment on capital projects.

Capital Expenditure and Job Creation

The budget will also introduce additional measures for the productivity-linked incentives (PLI) scheme. This could involve increasing allocations or including more labour-intensive sectors such as textiles, leather, footwear, and toys. These steps aim to enhance job creation across various sectors.

The agency suggested that there should be a focus on significant divestments. It pointed out that there is potential to raise up to Rs 11.5 lakh crore if the government retains a 51 per cent stake in all state-owned companies.

In summary, the upcoming Union budget will prioritise boosting consumption through increased spending on welfare schemes and rural development. At the same time, it will continue its focus on capital expenditure and job creation initiatives.