Leading global investment banking and securities firm Goldman Sachs in a note said the upcoming budget is likely to stick to the path of fiscal consolidation, and will focus on the broad economic agenda rather than doling out minor stimulus measures.

There is limited fiscal space, Goldman Sachs said, to stimulate the economy given high public debt. That apart, India’s infrastructure upgrades have created long-term positive growth spillovers, which they believe policymakers may not be willing to give up.

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Goldman Sachs believes that the government is likely to stick to the announced fiscal deficit target of 5.1 per cent of gross domestic product (GDP) for FY25 (or even slightly lower) and announce further consolidation to a deficit of below 4.5 per cent of GDP by FY26.

“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 (coinciding with centennial of Indian independence),” wrote Andrew Tilton, chief Asia-Pacific economist and head of EM economic research at Goldman Sachs in a note co-authored with Santanu Sengupta and Arjun Varma.

The article said that the job creation through labour-intensive manufacturing, credit for MSMEs, continued focus on services exports by expanding GCCs, and a thrust on domestic food supply chain and inventory management to control price volatility are some of the areas that Finance Minister Nirmala Sitharaman’s Modi 3.0 budget is likely to focus on.

Economists at Goldman Sachs said the budget is also likely to lay out a path for the future of public finance in India, entailing a roadmap for public debt sustainability, and green finance.

This is the first time in the last ten years that the Bharatiya Janata Party (BJP) will be running a government without a majority on its own in the Lok Sabha. A reduced political mandate, analysts at Goldman Sachs said, will require more political capital to be spent behind passing structural reforms like land reform and farm sector reforms.

“In our view, the allocation from the Centre might not be large as a hypothetical transfer of 0.1 per cent of national GDP to the states would in itself imply a 3 per cent / 2 per cent of state GDP boost to Bihar / Andhra Pradesh,” the note said.