Economists and analysts hailed the interim Budget presentation by Finance Minister Nirmala Sitharaman and said that it clearly elucidates the government’s intention to promote growth through inclusive policies. The budget ensures the continuation of fiscal discipline and extension of time-tested policies which have boosted the Indian economy in recent years, said analysts. “This is a judicious interim budget. The degree of fiscal consolidation with a target of 5.1 per cent in FY25 is more than anticipated and is positive for softening of bond yields. Further, the reiteration of the fiscal target for FY26 gives the bond market medium term visibility. The consolidation impacts expenditure including capex by the government. As regards FY25, we would expect more policy direction to emerge when the full budget is presented later this year,” said Vetri Subramanian, Chief Investment Officer, UTI AMC.
The finance minister presented the interim Budget on Thursday for the next financial year (2024-25). It was her sixth budget presentation, but was different from all the others because this was an interim budget.
“Being an interim Budget, there were no big bang policy announcements, however the Budget touched upon some key points. On the top comes the path towards fiscal consolidation which was something that the whole investor community was waiting on whether the budget can deliver on the growth agenda keeping in mind the fiscal prudence. The Government has kept its growth agenda at the forefront along with showing seriousness towards maintaining the fiscal deficit glide path,” said Vaibhav Shah, Fund Manager, Torus ORO PMS.
Here are views from economists and analysts on the interim Budget…
Anurag Mittal, Head of Fixed Income, UTI AMC
The budget is distinctly positive for the fixed income market. The budget continued its push on public capex while balancing fiscal responsibility. The fiscal deficit target of 5.1 per cent for FY25 was below all consensus estimates and the most positive aspect was the gross borrowing number of 14.1 trillion well below market estimates of 15-15.2 trillion.
Pranav Haridasan, MD and CEO, Axis Securities
As anticipated, this vote-on-account budget presented no major surprises for equity markets. However, it infused enthusiasm into the bond market and all interest rate sensitives with its announcements regarding fiscal prudence and subsidy reductions. The fiscal deficit is on a consolidation path with a projection of 5.1 per cent in FY25 vs 5.8 per cent for FY24, which is commendable. Coupled with net borrowings of Rs 11.75 lakh crore, which is less than market expectations, the bond markets have much to rejoice. The overall borrowing figures were lower than the previous year, another positive from a fixed-income perspective. A drop in subsidies from 1.48 per cent to 1.25 per cent of the GDP reflects a commitment to fiscal responsibility. While there is a slight cause for concern in the market regarding the marginally lower-than-expected overall capital expenditure, it still represents a substantial commitment to key developmental initiatives. Overall, with its focus on building upon the current economic trajectory, the budget retains the growth roadmap.
Indranil Pan, Chief Economist, YES Bank
This budget lacks major announcements but clearly elucidates the government’s intention to promote growth through inclusive policies. In this sense, one should expect continuity from the government if re-elected. Another appealing aspect is the roadmap laid out by the finance minister to achieve the 4.5 per cent fiscal deficit to GDP target by FY26. Accordingly, the 5.1 per cent target for FY25 represents a significant step towards achieving the 4.5 per cent goal. At the same time, the FM continues to take responsibility for leading capital expenditures.
Dipti Deshpande, Principal Economist, CRISIL Ltd
A lower fiscal deficit hinging on moderation in revenue spend and realistic GDP growth and tax collection assumptions were the highlights of this interim budget. The budget relies on a mix of capex and rural spending to bolster growth. Growth in capex is slower, but its share in GDP is higher on-year, suggesting continued dominant role of government investment.
The return of budgetary support to rural employment and incomes after a brief hiatus will support rural demand, which has turned sluggish of late. Despite the rural focus and a pre-election setting, the budget refrains from being inflationary. This also ensures a favourable setting for monetary policy. In addition, a lower fiscal deficit and lower market borrowings will comfort government bond yields in the coming fiscal.
Lalit Kumar, Partner, JSA Advocates and Solicitors
The disinvestment has not progressed as expected for FY24 despite robust Indian capital markets. Successful and robust disinvestments lead to good values being generated, bringing quality scrips to the securities market and enriching retail investors economic value. It generates funds for the government to fund its budget targets, a deficit on the other hand will hold up projects. Large public sector enterprises with substantial government holding going for disinvestment has several merits and brings new management if the disinvestment gets in new management also.
Vaibhav Shah, Fund Manager, Torus ORO PMS
Being an Interim Budget, there were no big bang policy announcements, however the Budget touched upon some key points. On the top comes the path towards fiscal consolidation which was something that the whole investor community was waiting on whether the budget can deliver on the growth agenda keeping in mind the fiscal prudence. Gross Fiscal Deficit for next year at 5.1 per cent with a mention of moving towards the target of 4.5 per cent by FY26 was a bold move keeping in mind that most of the expectations were on the higher side specially this being an election year. The Government has kept its growth agenda at the forefront along with showing seriousness towards maintaining the fiscal deficit glide path.
Secondly, an allocation of Rs 11.1 trillion for capex outlay sets the tone for growth-oriented reforms and signals continuation of development policies. The borrowing numbers were also kept modest in spite of inclusion in the JPM Bond index which could have shouldered any additional borrowing without causing any wild movement in yields. Overall, tax buoyancy looks better and disinvestment targets have also been on conservative side. Thus, we believe that it was a growth-oriented budget with a clear focus on kickstarting the capex cycle.
Rajesh Sinha, Senior Research Analyst, Bonanza Portfolio
Budget has reduced the fiscal deficit target at 5.1 per cent of GDP for FY25. It revised down the fiscal deficit target for FY24 to 5.8 per cent from 5.9 per cent of GDP. This has the potential for lower interest rates due to a larger-than anticipated decrease in fiscal deficit, enhancing the overall macroeconomic stability. Also, Gross Market borrowing for FY25 Rs 14.13 lakh crore and Net Market borrowing at Rs 11.75 lakh crore. This move can be a positive for public sector banks.
Budget announced a capex allocation of Rs 2.55 lakh crore for the Indian Railways in the new financial year, against Rs 2.4 lakh crore allocated in the last budget.
Sandeep Das, MD & CEO, Centrum Wealth
For an interim budget, the announcements made today reinforced the Government’s resolve on fiscal consolidation and pro-growth outlays that steered away from populist spending, especially ahead of a major election. Thus, as against street expectations, the Government projected a lower fiscal deficit of 5.1 per cent of GDP in FY25. The 11 per cent increase in infrastructure spending also was a welcome surprise. Support for innovation and start-ups and a significant thrust on renewable energy reflect impetus towards much needed focus areas. Finally, through lowering its borrowings, the Government has made space for the private sector to step in and take over the baton on investment spending. Overall, a welcome part of the broader vision for a ‘Viksit’, Developed and Prosperous Bharat@ 100 by 2047.
Saji John, Research Analyst, Geojit Financial Services
Overall, the budget hails for economic development and narrows the fiscal deficit to 5.1 per cent in the next financial year. The government intends to let the private sector run with a capex growth of 11 per cent for the upcoming fiscal year while modernizing the rail network and port links to boost tourism, increase logistics efficiency, and reduce costs. The government has allotted Rs 8,500 crore and Rs 600 crore for solar and national green hydrogen, respectively, to emphasize the usage of renewable energy.
Harshad Patil, CIO, Tata AIA Life Insurance
The Finance Minister stayed firmly on the path of fiscal consolidation by delivering the FY 2024 fiscal deficit at 5.8 per cent and projecting the FY 2025 fiscal deficit at 5.1 per cent in the Union Budget. There were a slew of initiatives for solar energy, railways, EV ecosystem, defence and tourism among others. The Union budget has been welcomed by the bond markets for adhering to fiscal consolidation and the bond market expects the FY 2025 borrowings to be comfortably absorbed. Overall, the Union budget ensures the continuation of fiscal discipline and extension of time-tested policies which have boosted the Indian economy in recent years.