Pre-Budget Expectations: Deepak Ramaraju, Senior Fund Manager at Shriram AMC

It is concerning that GDP growth has recently slowed to a 7-quarter low of 5.4% in 2QFY25. It is expected that in response, the government will give priority to policies that bolster growth, especially by providing financial assistance to those with lower incomes. Key areas of focus are likely to include investments in infrastructure development, sustainable energy initiatives, a manufacturing sector boost, and continued spending on defense and railways—all of which can play a crucial role in bolstering economic growth and increasing demand for SMEs.

Furthermore, increased spending on social sectors such as healthcare and housing, along with the implementation of a direct tax code and a simplified tax structure, could increase disposable income, and encourage greater consumption, particularly among lower-income groups.

From a market perspective, it is essential to strike a balance between growth-centric spending and fiscal prudence. Markets will pay close attention to any guidance that shows GDP growth is higher than 6.5%, as this could be interpreted favorably. A growth-oriented budget is essential, but the government may tread cautiously regarding populist measures, as such steps could exacerbate the fiscal deficit, weaken the Rupee, and potentially delay economic recovery by limiting rate cuts. Any deviations from fiscal discipline or indications of lower growth expectations could lead to market sell-offs.