India’s Modi may tackle economic slowdown, impending trade turmoil in annual budget #IndiaFinance

By shivangi Acharya

NEW DELHI (Reuters) – Indian Prime Minister Narendra Modi may seek to shore up faltering economic growth, placate a middle class squeezed by high prices and low wage growth, and prepare for an uncertain year of global trade in the nation’s budget this week.

Finance Minister Nirmala Sitharaman will present the budget for the next fiscal year on Feb. 1 at 0530 GMT.

The budget may provide a policy boost for the world’s fifth-largest economy, which is expected to post its slowest pace of growth in four years, amid frail urban demand and inflation risks fuelled by a weak currency.

Economists expect measures to raise disposable incomes and tariff cuts to encourage local manufacturing.

“We could see a nod from the government, to signal to the middle class that we aware of your challenges and we would like to raise disposable incomes, which increases spending power,” Priyanka Kishore, director and principal economist at research firm Asia Decoded said.

Reuters reported last month that India is considering cutting tax on personal incomes to provide some relief.

The budget could also introduce tax cuts on fuel prices or cooking gas, Dhiraj Nim, an economist at ANZ said.

Despite world-beating growth, India’s job market offers insufficient opportunities for its large youthful population to earn regular wages.

In the last budget, India earmarked nearly $24 billion to be spent over five years in various schemes to create jobs but those programmes have not yet been implemented as discussions on details drag on.

“They will focus more on direct measures for employment generation and skilling,” Kishore said.

India will also have to cope with possible global disruptions from U.S. President Donald Trump’s trade policies.

To support local production, the government could offer concessional tax rates to companies that use the country as a manufacturing hub, lower custom duties on intermediate inputs and raise tariffs to counter goods dumped from China, Nomura economists said in a note.

India will also see an opportunity to clinch a larger share from further global supply chain shifts spurred by Trump’s new tariffs, Nomura economists said.

To that effect, India has drawn up a list of products that act as inputs for various local production units and is considering cutting import taxes on them, a senior government sources aware of the matter said.

The list likely includes components for mobile phone assembly such as printed circuit board assembly, parts of camera modules, and USB cables, two industry sources said.

Story continues