Budget 2024: No sharp cutback in capex; focus may be on women-centric policies, says Achala Jethmalani of RBL Bank

The Budget will showcase policy continuity and commitment to fiscal consolidation, with a gradual pace of consolidation expected in 2024, says Achala Jethmalani of RBL Bank.

Nishant Kumar
First Published29 Jan 2024, 05:02 PM IST
Achala Jethmalani, Economist at RBL Bank
Achala Jethmalani, Economist at RBL Bank(RBL Bank)

Achala Jethmalani, Economist at RBL Bank believes the Budget will show the government's commitment to fiscal consolidation and there may not be a sharp cutback in capex (capital expenditure) as such. She expects the government to continue with its capex spending in FY25 as well. In an interview with Mint, Jethmalani also shared her views on the Indian economy. Edited excerpts:

What are your expectations from Budget 2024? Do you think the government may expand some of its welfare schemes ahead of the General Elections? Will that be a drag on the domestic economy?

We are of the view that the Budget would showcase policy continuity and commitment to fiscal consolidation and walk the fiscal glide path of reaching 4.5 per cent fiscal deficit to GDP ratio by FY26. 

The pace of consolidation in 2024 is expected to be a gradual unless the government factors in optimistic growth and a higher tax mop-up. 

As per our estimates and analysis, assuming a tax buoyancy (of 1.03) and slower rate of increase in total spending vis-à-vis GDP growth would keep the government on the fiscal consolidation roadmap; we do not see a sharp cutback in capex as such. 

Also Read: Budget 2024 Expectations Live Updates: Auto, FMCG, IT, Agriculture, Salaried class, other sectors share their wishlist

As our base case, we assume the government continuing with its capex spending in FY25 as well. 

There is an outside chance of more welfare schemes being announced. 

Also, the focus could be on women-centric policies – either a certain amount of cash handout per household or women education/healthcare could be softer possible policy steps. 

Example, last year Sukanya Samridhi account scheme – a deposit scheme - was announced. We could see similar steps.

Also Read: Budget 2024 Expectations Highlights: Housing, IT, Auto, FMCG, agriculture and other sectors share wishlist

What sectors could be in focus in Budget 2024?

Apart from roads and transportation, railways and defense sector, we are also expecting to see greater focus on industry, manufacturing sector, EVs, renewable and green energy sectors. 

Digital infrastructure, robotics and AI, space sector and tourism, in our view, could be in focus too.

Also Read: Budget 2024 Expectations: Five key sectors that may benefit from this interim budget

What are your views on the Indian economy? We are one of the fastest major economies but risks in terms of geopolitical tensions, and poor monsoon loom. How do you see the road ahead for the next financial year?

Growth momentum is seen continue with an across the board growth in core sectors (on the supply side). 

On the demand side, consumption could remain soft, but positive; supporting our estimate of 6.5 per cent growth in FY25. 

Government spending is expected to remain on the higher side. 

The downside from weak agriculture sector is factored in our estimates; but 2024 monsoon remains crucial for growth momentum to sustain. 

Also Read: Indian economy gains momentum in January: HSBC

Geopolitical and sea-route tensions are key near term headwinds which could potentially shave-off growth if the exports were to get negatively impacted. 

The year 2024 could see volatility in markets given that there are elections in India and the US, but economic momentum for India is expected to continue on the back of past years’ capital investments’, infrastructure backed government policy on spending.

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Core inflation is cooling. Do you think RBI will feel more confident in reducing rates in the first half of the year?

Core inflation is soft, however, food inflation volatility would keep the MPC panel cautious to vigilant. A softer, dovish policy stance is likely only in the second half of the current calendar year.

Also Read: Is India’s inflation finally going down?

What are your views on the Indian banking system? What government measures could benefit the banking industry?

The banking sector remains well-placed overall with some bouts of strain seen lately on the cost of borrowing front, emanating largely from the tight system liquidity situation. 

Incentives in sectors, government schemes such as Affordable Housing, agriculture sector by way of crop insurance and financial inclusion (by women-centric schemes), digital infrastructure and the DBT policy would augment for the banking/financial sector ecosystem.

Also Read: 'Gradual turnaround in the banking sectors,' RBI Governor at Mint BFSI Summit | 14 key highlights

Read all Budget-related news here

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 decisions.

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First Published:29 Jan 2024, 05:02 PM IST
HomeEconomyBudget 2024: No sharp cutback in capex; focus may be on women-centric policies, says Achala Jethmalani of RBL Bank

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