In its annual budget on Tuesday, India is expected to increase spending on infrastructure, health care, and social programmes of an effort to put the economy on a more solid basis as it battles a surge in COVID-19 cases and rising inflationary pressure.
Finance Minister Nirmala Sitharaman is anticipated to announce increased spending on roads and railroads, as well as higher subsidies for affordable housing, in response to mounting public outcry about insufficient relief following the pandemic's onset in 2020.
"The fiscal position appears much healthier than expected ahead of the (budget) announcement," said Shilan Shah, economist at Capital Economics, Singapore in a note.
The strong revival in revenue receipts, which rose 67% during April-November period from a year earlier implied that the government has a "fiscal space to provide additional support if necessary", Sanjeev Sanyal, principal economic adviser at the finance ministry told reporters on Monday.
To attract investments that create jobs and spur growth, Sitharaman could also boost incentives tied to production in more industries, the official said.
Food processing and exports are two areas that could see more production-linked incentives, two senior government officials said, adding no major budget changes were likely on individual and corporate taxes, in view of rising government debt and subdued private investments.