Budget 2024 expectations: Nirmal Bang highlights 6 major themes that could dominate the Interim Budget 2024

Finance Minister Nirmala Sitharaman will present the Interim Budget for the financial year 2024-2025 (FY25) on February 1 which is likely to keep the focus on fiscal consolidation led by capex (capital expenditure) growth moderation, according to brokerage firm Nirmal Bang.

Since 2024 is an election year, with Lok Sabha Elections expected in April-May, the finance minister will bring in an Interim Budget or a Vote on Account in February. After the formation of the new government, a new full Budget is expected in July this year.

As a a Vote on Account is merely an interim authorisation to spend money, as opposed to a full Budget that includes details of expenditures and receipts, including tax changes and government policies, this time significant tax and policy changes are unlikely.

Also Read: Budget 2024: What is Vote on Account? Significance and more…

Nirmal Bang expects fiscal consolidation in FY25 with a deficit likely at about 5.5 per cent of GDP, largely driven by moderation in government capex growth at 15 per cent.

The brokerage firm highlighted the following six major themes that could dominate the Interim Budget 2024. Take a look:

1. Fiscal consolidation in FY25 to be led by moderation in capex growth

Nirmal Bang expects the fiscal deficit to come in at 5.5 per cent of GDP in FY25, led by moderation in capex growth to 15 per cent from an estimated 36 per cent in FY24. 

Also Read: Budget 2024 to focus on fiscal consolidation, capital expenditure: Barclays

Revenue expenditure growth is expected to be modest at 2.5 per cent in FY25, according to Nirmal Bang.

The brokerage firm expects subsidies to be largely flat in FY25 compared to FY24.

Also Read: Budget may cite ‘Vision 2047’ to seek long-term allocations

2. Roads and railways likely to lead capex

The brokerage firm pointed out that despite moderation in government capex growth, it will continue to be dominated by roads and railways.

"Railways may see the highest increase in allocation, with spending up by nearly 40 per cent year-on-year (YoY) in FY24 year-to-date. The railways are leading from the front in central government and CPSE project announcements in FY24," said Nirmal Bang.

Also Read: Vande Bharat to bullet train, Railways to ride a ₹3 tn budge

3. Spending on rural, agri sectors may see a turnaround

Nirmal Bang underscored that the spending by the Ministry of Rural Development is down by 8 per cent YoY in FY24 year-to-date while spending by the Ministry of Agriculture is flat. 

The brokerage firm believes this could change in the coming months on the back of higher allocation under NREGS and other rural development schemes.

The brokerage firm also expects higher spending on the agriculture sector, led by higher outgo under the PM Kisan Scheme.

Also Read: Budget 2024: Focus on rural schemes, infra investment likely, says veteran fund manager Mihir Vora

4. Disinvestment revenue could do better in FY25

According to the brokerage firm, the divestment target in FY24 is likely to be missed.

"We are factoring in divestment receipts of nearly ₹15,000 crore in FY24 against the budgeted ₹61,000 crore. Divestment receipts in FY24 year-to-date stand at nearly ₹12,300 crore, including the recent NHPC offer for sale. We are more optimistic about the divestment target for FY25 and are pegging it at ₹50,000 crore. The pace of divestments could likely pick up post the Lok Sabha elections in FY25," said Nirmal Bang.

5. Upliftment of the bottom of the pyramid and women likely to be in focus

The brokerage firm expects policies to extend the social safety net to the bottom of the pyramid, including through comprehensive insurance coverage and support for Women. Affordable housing schemes may get a boost.

Also Read: Budget 2024: Government plans incentives for affordable housing ahead of Lok Sabha elections

"We expect policies oriented towards the upliftment of ‘bottom of the pyramid’, which are aimed at reducing out-of-pocket expenditure on necessities and emergencies. The extension of the PM Garib Kalyan Anna Yojana was a step in this direction. Expanding the scope of health insurance through Ayushman Bharat could be another such move. In addition, support for affordable housing in rural and urban areas is a possibility," said Nirmal Bang.

The brokerage firm also expects initiatives towards women’s empowerment through employment generation schemes and economic safety nets.

Moreover, a higher allocation under the NREGS is a given, according to Nirmal Bang, given some signs of rural distress due to erratic weather. A higher payout under the PM Kisan Scheme (existing ₹6,000) is also expected.

6. Sustained emphasis on manufacturing, clean and green tech

Nirmal Bang expects continued emphasis on increasing the domestic manufacturing base which could involve tweaking existing production-linked incentive (PLI) schemes or bringing new sectors under its ambit.

"Clean and green technologies and the surrounding ecosystem are likely to remain in focus. Faster Adoption and Manufacturing of Electric Vehicle (FAME) subsidies are likely to continue with some rationalisation. Indigenisation of defence and defence exports may also receive a push," said Nirmal Bang.

Also Read: Budget 2024: From FAME scheme subsidy extension to GST reduction, here are the key expectations of the EV sector

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Disclaimer: The views and recommendations above are those of the broking company, not of Mint. We advise investors to check with certified experts before making any investment decisions.