Brokerage agency Jefferies said the government won’t need to walk a fiscal tightrope in balancing discipline with capex and growth plans in the upcoming Budget.

Thanks to the RBI’s dividend and robust tax revenues, the central government enjoys a financial cushion of approximately 40-50 basis points, it said.

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This financial buffer allows the government to satisfy various vested interests, enabling higher capex and increased social spending while maintaining a tighter fiscal policy.

Jefferies anticipates the Budget will positively impact sectors such as affordable housing, capex plays, consumer companies, and rate-sensitive industries.

However, the IT and pharma sectors may not see significant boosts in this Budget, it said.

As per the rating agency, the rising income tax collections and fiscal space could allow the government to give a meaningful income tax cut. This would provide relief to taxpayers and potentially stimulate economic growth through increased consumer spending.

It suggested that the government could likely bring back the interest subsidy – Credit Linked Subsidy Scheme – CLSS – scheme for urban housing.

The budget for capital expenditure could be raised by Rs 30,000 crore from Rs 11.11 lakh crore currently.

However, non-capex expenditures may also be raised, with Jefferies projecting a Rs 50,000 crore hike in welfare spending.

The brokerage also believed that there could be a reduction in the borrowing target as well.