India’s Modi expected to curb populist welfare spending in pro-growth budget

Modi’s ruling Bharatiya Janata Party (BJP) is dependent on coalition allies in the National Democratic Alliance (NDA) following the loss of 63 seats in the April-June elections, which reduced the BJP’s tally to 240 from 303 seats in 2019.

The next federal budget is expected to be introduced at the beginning of the new parliament’s first session on July 22. Electoral losses have sparked concerns over whether Modi would be tempted to give more handouts rather than focus on reforms.

“The relatively poor showing of Modi and the BJP are partly because the voters are trying to push the government to refocus efforts on the economy and improve the lives and livelihoods of the public,” David Tay, head of Asia country risk at BMI, told a webinar titled “The Modi Operandi: India’s Outlook Post-Election on June 5.”

The BJP fared poorly in states where it tried to push a Hindu nationalist agenda like Uttar Pradesh, where Modi presided over a high-profile opening of a temple to the Hindu god Ram at the site of a disputed mosque in January, according to Tay.

“I think the lesson here that the government will take away is that bread and butter issues are what decide votes,” Tay said, adding that the country was set to remain one of the fastest-growing major economies in the medium term.

The country’s gross domestic product grew by 8.2 per cent in the financial year that ended on March 31, exceeding the government’s 7.6 per cent forecast. India’s economy is expected to overtake Germany and Japan to become the world’s third-largest economy by the end of this decade.

Still, the country’s unemployment rate has remained stubbornly high, especially among younger people and emerged as a key concern for voters in the recent elections. Economists say