Indian Prime Minister Narendra Modi’s government has no plans to increase its budget deficit target, despite speculation that additional spending may be needed to appease coalition partners, a government official said.
Modi’s Bharatiya Janata Party (BJP) failed to secure an absolute majority in elections that ended on June 1, although it secured a third term with the support of 14 regional parties.
Ratings agencies and analysts said the government could increase social spending as well as support for states represented by National Democratic Alliance partners.
Two of the BJP’s main allies, the TDP from the southern state of Andhra Pradesh and the JD(U) from the northern state of Bihar, have requested special financial assistance, according to local media.
In February, when announcing its interim budget, the government set a fiscal deficit target of 5.1% of GDP, down from the previous year’s revised figure of 5.6%. The final budget will be presented in July.
“There will be no fiscal easing at least in 2024-25,” said the official, who declined to be identified because government budget discussions are confidential.
The official added that if Indian states requested immediate financial assistance, there would be enough room in the budget to meet these demands.
The finance ministry did not immediately respond to a Reuters request for comment.
The interim budget provides loans of 1 trillion rupees ($12 billion) to states, which they can use for capital expenditure, as well as loans of 750 billion rupees for states undertaking certain reforms.
The figures presented in the final budget will be largely similar to those in the interim budget, the Source added.
On Monday, the government reappointed Nirmala Sitharaman as finance minister, a sign of great continuity in policies.
($1 = 83.4970 Indian rupees)
