India’s high public debt poses challenges for implementing welfare measures to boost the economy, according to a recent report by Goldman Sachs. Despite investor expectations for a shift towards welfare spending in the upcoming budget, the brokerage suggests that limited fiscal space may hinder major stimulus efforts.
The report predicts that Finance Minister Nirmala Sitharaman is likely to adhere to the 5.1 per cent fiscal deficit target, with a possible reduction to 4.5 per cent by FY26. While there may be some allocation towards welfare spending, the report emphasizes the constraints posed by high public debt and infrastructure investment commitments.
The upcoming budget is expected to focus on job creation, labor-intensive manufacturing, small business credit, services exports, and managing food supply chains to control price fluctuations. Additionally, it may outline a roadmap for sustainable public debt and green finance in India.
Overall, the report highlights the need for a balanced approach to fiscal policy in the face of economic challenges and infrastructure demands.