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2023/24 budget to be tabled in parliament at 0530 GMT, Feb.1

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Govt may aim to reduce 2023/24 fiscal deficit to 5.8%-5.9%

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Economic survey pegs 6%-6.8% economic growth for 2023/24

By Manoj Kumar

NEW DELHI, Feb 1(Reuters) - Presenting its annual budget to parliament on Wednesday, India's government will seek to lower its fiscal deficit while offering incentives for investment and stepping up state spending to support an economy that is caught in the global slowdown.

Although the government faces elections in key states this year and a national vote in 2024, the budget is unlikely to offer major relief to households due to fiscal constraints, officials have said, while noting that the budget would focus on long-term growth.

Since taking charge in 2014, Prime Minister Narendra Modi has ramped up capital spending including on roads and energy, while wooing investors through lower tax rates and labour reforms, and offering subsidies to poor households to clinch their political support.

Finance Minister Nirmala Sitharaman is widely expected to continue that policy, and announce 10% to 12% increase in budget allocations for health, education and rural projects, helped by a pick up in tax collections.

"The annual budget will continue economic reforms," said Gopal Krishna Agarwal, economic affairs spokesman of Modi's Bharatiya Janata Party.

"The easing of retail inflation, higher state spending and growing bank credit would help the economic recovery ahead of the national elections," he said.

Critics, however, say Modi's economic policies have largely benefited big companies, while putting more tax burden on middle class families, who are now facing lower growth in both real income and jobs.

A finance ministry's annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% year-on-year next fiscal year, down from 7% projected for the current year, while warning about the impact of global slowdown on exports.

"India's growth outlook seems better than in the pre-pandemic years, and the Indian economy is prepared to grow at its potential in the medium term," the report said.

International Monetary Fund has forecast India's economy would grow by 6.1% in 2023/24, slowing from 6.8% in this fiscal year.

Like many other economies, India faces a risk from the global slowdown, which would impact domestic manufacturing and exports. And higher global prices for fuel and commodities caused a surge in inflation higher, and led to higher interest rates, which has also dampened economic growth.