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Business News/ Economy / Budget 2024: Any major sops unlikely, expect relief measures for rural sector, says Madhavi Arora of Emkay Global
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Budget 2024: Any major sops unlikely, expect relief measures for rural sector, says Madhavi Arora of Emkay Global

Emkay Global expects the policy direction to remain largely similar to recent budgets, with a focus on balancing growth recovery and fiscal constraints. Some relief measures for rural, agricultural, and welfare sectors are expected.

The interim budget will be presented on 1-Feb-2024 and is just a vote on account to manage fiscal accounts until the new government presents the entire budget.Premium
The interim budget will be presented on 1-Feb-2024 and is just a vote on account to manage fiscal accounts until the new government presents the entire budget.

Given its interim nature, the forthcoming budget is unlikely to include any significant announcements on new taxes or spending proposals. Brokerage Emkay Global Financial Services stated in its report that despite this, it would still set the stage for future policy decisions and be monitored for the rate of fiscal consolidation and policy priorities on capital expenditure and non-capital expenditure spending.

The upcoming Union budget for FY25, which will be presented on 1-Feb-2024, will be an interim one. Following the general elections in May 2024 and the formation of a new government, the entire budget will be presented. In theory, the interim budget is just a vote on account to manage the fiscal accounts of the outgoing administration and request permission for necessary spending outlays until the new government presents the entire budget. Therefore, it is technically impossible for it to include any significant policy statements.

Also Read: Interim Budget 2024: What should be your trading strategy to prepare for Feb 1

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Nonetheless, an evaluation of the fiscal revenues, outlays, and projections for the upcoming year are all included in the interim budget in general.

"We expect the policy direction and prerogatives to remain largely similar to that for the recent budgets, as the trade-offs remain between nurturing growth recovery and the diminishing fiscal space with challenging debt dynamics. Besides, the improving intersection of politics and economics implies that political capital is no longer as compromised around election cycles as perceived," said brokerage Emkay Global in its report.

The brokerage stated in its analysis that while there is less of a possibility of competitive populism at the central level, it still expects some relief measures for the rural, agricultural, and welfare sectors. Nevertheless, with a predicted capex/GDP of 3.3%, the capex/revex ratio is expected to continue to improve. Though tax growth is slowing, the gross tax to GDP ratio is expected to remain stable at 11.4%.

"Overall, we project FY25E GFD/GDP at 5.4% after 5.9% in FY24E, implying net and gross borrowing at a still significant 11.5trn and Rs15.2 trn, respectively. While net borrowing would be 65% of fiscal funding, small savings are likely to fund 25% of the GFD (27% in FY24E)," the brokerage said.

Also Read: Budget 2024: Expect pro-demand steps to address near term risks, says DBS Bank economist

The FY25 Budget Math: Balancing act

According to the brokerage's assessment, it seems sense that markets would be fixated on the headline objective when assessing the fiscal policy position. Policymakers are still having difficulty with the delicate task of maximising the fiscal stimulus, even though the government is expected to reach its fiscal objective in FY24. Aiming for consolidation while also acknowledging the difficult decision to balance future debt sustainability and development momentum.

"On a broad level, the policy challenges have somewhat evolved from last year, but the pre-election year populist bias may still exist at the margin," the brokerage said.

Also Read: Budget 2024: Expect pro-demand steps to address near term risks, says DBS Bank economist

Earlier, the NDA-I had also declared some fiscal perks and concessions for the agriculture industry and other weaker economic sectors in the interim budget for February 2019. Nevertheless, The brokerage's latest research indicates that the evolving political environment and the consolidation of power have shown a decline in the pro-cyclical inclination of policymakers throughout election cycles. Thus, the brokerage exclude the possibility of any kind of aggressive, competing populism.

Also Read: Budget 2024 expectations: Focus may be on reviving rural economy; more sectors may come under PLI: Rahul Jain of Nuvama

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.

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Published: 23 Jan 2024, 04:54 PM IST
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