India will probably unveil bold reforms in its budget on Thursday in a bid to turn around an economy growing at decade lows, but major changes to taxes will be absent, a Reuters survey showed.
Finance Minister Arun Jaitley will present his maiden budget after his Bharatiya Janata Party, led by Prime Minister Narendra Modi, won a landslide victory in May to form the first majority government in three decades.
Expectations of a BJP win sparked a rally in Indian assets since then, with stock markets soaring to record highs on Modi's business-friendly image and hopes key reforms required to jump-start economic growth will be swiftly implemented.
Seventeen of 24 economists surveyed between July 3-7 expect the 2014/2015 budget to live up to those expectations, even though the government is likely to increase its fiscal deficit target to 4.4 percent of gross domestic product (GDP).
It is already running at close to half the annual goal of 4.1 percent inherited from the previous government barely three months into the budget year. That will likely lead to higher borrowing of 6 trillion rupees ($100 billion), 30 billion rupees more than the current target.
"It does look like the budget will lay the groundwork for some important reforms," said Vishnu Varathan, senior economist at Mizuho Bank in Singapore.
However, he added that tax reform plans, which include a goods and services tax (GST), won't be implemented for a while, "probably the year after next".
Increased spending on social welfare and other benefits has been commonplace in Indian budgets for many years. But analysts say the tone of this budget will be different, mainly steering clear of populist measures.
A majority of economists expect Jaitley to cut giveaways on fuel and petroleum products to reduce India's $40 billion subsidy bill -- a key reason for the wide fiscal deficit.
While the price of petrol is already decontrolled and tied to international market rates for crude oil, prices of diesel and cooking gas are still regulated by the government.
Cutting subsidies on food and fertilisers will be difficult, however, due to the likelihood of a poor monsoon stemming from the El Nino effect, which could drive food prices higher, economists said.
Jaitley is also expected to cash in on soaring stock markets and sell government stakes in major public companies to raise funds and bridge the gap between revenues and expenditure.
The median consensus is for the divestment target to be raised to above $11