New Delhi: Wall Street major Goldman Sachs does not expect any significant reforms to be announced in this budget, but some details on incentives for 'Make in India', a roadmap on direct tax code implementation, and rationalization of subsidies, particularly fertilizers.


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The Indian Union budget will be presented on February 1 as the final full-year budget under the current administration before the national elections in mid-2024. (Also Read: BIG Cabinet Decision: Now THESE beneficiaries will get free ration for one year; Check details here)


This comes at a time when the government is trying to weigh expenditure priorities around: welfare spending before the general elections, the reduction of subsidies as commodity prices have declined from previous highs, incentives for promoting manufacturing in India, continuing the infrastructure build, and a higher allocation for defence, Goldman Sachs said in a report. (Also Read: Senior citizens ALERT! THESE post office schemes offer higher interest rates than banks; check maturity calculator, other details)


"Given the general elections scheduled to take place in 2024, we expect the government to increase rural and welfare spending as seen in pre-election budgets in FY09, FY14, and FY19. In FY24, we expect current expenditure (excluding interest and subsidy) to be at 7.3 percent of GDP. Rural employment and housing are likely to be in focus," it said.


With India running one of the highest public debt-to-GDP ratios among emerging markets globally, firm adherence to the fiscal consolidation would seem the most appropriate path for the government.


The commodity shock required incremental spending on food and fertilizer subsidies, and exhausted the fiscal room from higher tax buoyancy in the current fiscal year. This apart, the government also tabled extra demand for spending before the parliament, comprising 0.8 percent of GDP (Rs 2.2 trillion) mainly towards capital expenditure, rural development, and defence, Goldman Sachs said.


"We expect the government to meet the budgeted fiscal deficit target of 6.4 percent of GDP1, but estimate an expenditure reallocation of 0.3 percent of GDP from another current spending," it said.


While uncertainty remains around the realization of disinvestment receipts, both direct and indirect taxes so far in the year are tracking well ahead of budget estimates. "We expect the Central government to consolidate its fiscal deficit to 5.9 percent of GDP in FY24, fully driven by a reduction in food and fertilizer subsidies, and project tax revenues to remain buoyant in the year, Goldman Sachs said.