The Budget could introduce a more standardized approach to taxation, according to a recent report.

In its preview of the India budget, Moody’s Analytics noted that the budget will impact both business and consumer confidence.

New Delhi: The full budget for 2024-25, set to be presented in Parliament on Tuesday, could see an increase in capital expenditure and may introduce a more standardized approach to taxation, according to Moody’s Analytics.

Following its loss of an absolute majority in the Lok Sabha in June, Prime Minister Narendra Modi’s Bharatiya Janata Party will aim to build confidence and public trust in the new coalition government it now leads, says Aditi Raman, Associate Economist at Moody’s Analytics.

While the interim budget kept tax rates unchanged, any increase in government spending will likely require a rise in tax revenues—through either direct or indirect taxation—to prevent the deficit from widening, Raman notes. Despite the recent election shaking up the government dynamics, major changes to economic policy are not expected. This post-election budget is likely to reinforce the goals outlined in the pre-election budget, which focused on infrastructure spending, support for the manufacturing sector, and fiscal prudence, she adds.

Moody’s Analytics anticipates that the budget will influence both business and consumer confidence.

India’s updated union budget is expected to either maintain or increase capital expenditure on infrastructure and funding for production-linked incentive schemes. The budget is also likely to introduce a more standardized approach to taxation, while overall policy direction is expected to remain consistent despite the election results.

India is projected to be one of the fastest-growing economies in the Asia-Pacific region for 2024 and 2025, driven primarily by government spending rather than domestic consumption or exports, which are key drivers in other parts of the region.

Capital expenditure has become increasingly vital for powering the economy, particularly through infrastructure investments. In February’s interim Union Budget, the government raised its allocation for capex spending by 11.1 percent to approximately USD 134 billion, or 3.4 percent of GDP, for the fiscal year ending in March 2025.