Union Budget 2025: Modi 3.0 to boost spending on welfare and rural Schemes: Goldman Sachs

Budget 2025

The Union Budget 2025 is likely to feature a significant increase in spending on rural welfare schemes, a Goldman Sachs report said on Monday. As the February 1 presentation approaches, various sectors of the industry and people from all walks of life have a long list of expectations they hope Finance Minister Nirmala Sitharaman will fulfil.

Presenting her eighth budget, Sitharaman faces the challenge of striking a delicate balance between populist schemes and stricter policies amid a cyclical growth slowdown.

The report states that the major concerns for the Modi government revolve around what to prioritize for spending and the speed of fiscal consolidation. "We believe that elevated public debt-to-GDP is likely to keep the fiscal consolidation path on track, and we expect the government to target a fiscal deficit of 4.4% to 4.6% of GDP in FY26 (down from 4.9% of GDP in FY25)," Goldman Sachs said in the report.

However, Goldman Sachs also stated that the era of the fastest growth in public capex has ended. The report noted that capex is likely to grow at or below nominal GDP growth rates going forward. "The budget is also likely to lay out a roadmap for public debt sustainability, and financing India’s energy security vs transition need," the report added.

On spending priorities in FY26, Goldman Sachs said that the expenditure on rural, transfer and welfare subsidies is likely to be around their pre-pandemic trends.

The report also touched upon the coalition politics after the 2024 Lok Sabha pols. "Given the reduced majority of the NDA (National Democratic Alliance) in the 2024 elections, there might be some re-allocation in expenditure towards rural transfers and welfare spending," the report further said.