As the surprise outcome of the election wears off, the coalition government’s agenda comes under focus. The first ‘100 days’ report card, which rose to prominence during the action-packed tenure of US President Franklin D. Roosevelt in 1933, will be the first milestone for the NDA administration.

A big shift in the government’s priorities post the poll results is unlikely, even as we expect more emphasis on an inclusive growth agenda and deeper support for the agrarian sector.

Continuity: The core Cabinet team was kept unchanged, which signalled the status quo on the broader policy direction by introducing certainty and consistency on the decision-making front.

This was followed by plans to transfer the 17th installment of the PM-Kisan fund, likely pending due to the model code of conduct, which will amount to ₹200 billion (0.1 per cent of GDP) to 93 million farmers. Subsequently, the Cabinet also approved government assistance for the construction of 30 million houses under the PMAY programme, with two-thirds to be built under the rural component.

Consistency: The gross fixed capital formation ratio to GDP has risen to north of 31 per cent in FY24 but is still below the FY12 peak.

A large part of the increase in capital expenditure by direct government and non-corporate private (households) has been concentrated in construction (of infrastructure projects) and real estate, reflected in ‘dwellings and structures’ under the GDP series, with higher private corporate participation expected to provide a boost to ‘machinery and equipment’.

Further tweaks to the PLI scheme and other incentives to better target the intended sectors, expand to a few ancillary segments, and ease disbursements are also likely to be under consideration. Subsidy allocations are likely to stay at similar levels as the interim budget. The revenue windfall from strong tax collections and RBI surplus transfer provides ample fiscal flexibility to not only target a small improvement in the FY25 deficit target but also accommodate additional stimulus measures.

Cost of living: Post-poll surveys signalled the need to address food inflation, job creation, and farm sector stress. After a record heatwave, the south-west monsoon has started with a 20 per cent deficit, posing a headwind for the agrarian sector, after farm output GVA growth averaged a weak 0.7 per cent yoy in FY24.

Direct support for farmers via inputs, including fertilisers, and a 5-10 per cent increase in MSPs for kharif crops, including rice and pulses, might be considered. Concurrently, to contain spillover impact on food prices, reports suggested that the government plans to add 16 new commodities to its price monitoring list, increasing the total to 38.

Income tax cuts for certain categories (for instance, on incomes over ₹15 lakh) might also be on the cards to boost disposable incomes.

Rating agency S&P recently upgraded the economy’s sovereign rating outlook, opening the door to a potential upgrade within the next two years.

With the large combined fiscal deficit and debt levels being highlighted as the drags on the sovereign, we expect fiscal consolidation to be demonstrated by lowering deficits to below 4.5 per cent of GDP next year.

This is likely to be accompanied by a gradual moderation in the path of the debt levels towards 80-81 per cent of GDP over the next five years. These incremental steps are focused on achieving bigger goals, such as meeting the government’s centennial goal of ‘Viksit Bharat’ plans by 2047 to rise from an emerging economy to developed status.

The writer is Executive Director and Senior Economist, DBS Bank.

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