Investors will likely be looking at how much the government will be spending to support farmers, who make up a sizeable portion of India’s workforce.
Farmers have been struggling for years due to low crop prices, rising costs, demonetization and widespread droughts.
Typically, India has given farmers loan waivers to help ease their financial burden. Other measures to support farmers’ incomes are being considered at a national level and could be introduced in Friday’s budget. That includes cash transfers that are already in place in some states where the local governments given farmers a fixed sum of money yearly for every acre of land they own.
“The final scale and shape of the scheme could vary, but we believe that the government is likely to rejig the manner in which the farm sector is currently supported — implying that some of the existing input subsidies are subsumed to fund the direct income transfer scheme,” Upasana Chachra, chief India economist at Morgan Stanley, wrote in a recent note.
If the scheme were to focus only on small and marginal farmers, it could cost India an estimated 0.7 percent of its GDP, Chachra said.