Budget: Will FM Deliver a Fiscal Bazooka?

With urban consumption falling sharply, the clamour for a large stimulus has grown louder

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Development and Communication (C). The Congress-led United Progressive Alliance government eventually lost power.

This led to the present wisdom of investment-led growth and the virtuous cycle it typically creates," he recalled. The present government has been very mindful of the loose fiscal policies of the 2008-10 period and the economic struggles thereafter. "The virtuous cycle has not been triggered to the desired level due to macroeconomic conditions and that does not mean the policy is wrong," Sinha added.

Rishi Shah, partner and economist, Grant Thornton Bharat, too does not expect any change in approach.

"China invested year after year to build its manufacturing base for the world. Government is unlikely to abandon fundamentals that it has focused on the last 10 years," he said.

Madhavi Arora, chief economist, Kotak Global Financial Services, agreed. "Last year, even with elections around the corner, the government neither gave up fiscal consolidation nor turned populist. Why will they do it this year?" she asked.

Token Stimulus?

The finance minister may still offer a token stimulus to send a message that the government understands the pain of the middle class and wants to help. Experts blame the fall in consumption on poor wage growth. Between Q3 FY24 and Q2 FY25, the average real wage growth for private non-financial companies was just 3.8%, as against 9.9% in Q2 FY22 to Q2 FY24 period.

Add to this the higher inflation which reduced the disposable surplus in the hands of the people. In this situation, putting some money in the hands of the people may not be a bad idea. "A targeted stimulus may be warranted but has to be crafted in a manner that yields the best results," said Shah.

The best results come only when people spend money and not save it-that is why any stimulus is seen as a double-edged sword.