Budget 2024 may be focused on these 5 themes, predicts Nomura
Finance Minister Nirmala Sitharaman's upcoming seventh Budget on July 23 is viewed as a platform for the Modi government to address new financial demands from allies, outline its vision, and set a reform agenda for the next five years. Most brokerages anticipate the Budget will emphasize policy continuity and prioritize fiscal consolidation.
When Finance Minister presents her seventh on July 23, it will be seen as a platform for the Modi government to showcase how it plans to manage allies' new financial demands, and also establish its vision and reform agenda for the next five years. Most brokerages expect the Budget to signal policy continuity and a strong focus on fiscal consolidation."We expect the government to lower its FY25 fiscal deficit target to 5% of GDP from 5.1% set in the interim budget. From a signaling perspective, there is an incentive for the government to project stability and an uncompromising focus on fiscal consolidation, despite the weaker political mandate," Nomura analysts Sonal Varma and Aurodeep Nandi said in a note.
The global brokerage firm has identified 5 potential themes that may emerge prominently in the Union Budget:
1) Consumption lift
Citing reports, Nomura said the government may look to boost consumer demand by raising the standard deduction limit for taxpayers under the ‘new’ tax regime (alternate regime introduced with no exemptions but lower tax rates) and possibly increase the exemption on income from bank interest. Other likely measures include lowering the personal income tax rate for those in the Rs 5 lakh to 15 lakh bracket.
2) Social sector focus
The government is likely to increase the outlay on rural sector schemes, with subsidies for housing to be increased by Rs 23,000 crore (~0.07% of GDP) as well as increased outlays for rural roads and employment. There are also reports of an expansion of the public health insurance programme and a renewal of the economic empowerment programme for women (Lakhpati Didi).
3) Manufacturing boost
Nomura expects the government to maintain its focus on promoting domestic manufacturing and announce an increase in the minimum local content requirement for public procurement, revive the concessional corporate tax rate of 15% for new manufacturing facilities, overhaul the 2019 national policy around electronics global value chain integration, and extend the PLI scheme to electronic components.
4) Infrastructure push
The focus on public capex will remain a key tenet of the government’s economic strategy, Nomura said, adding that it expects the government to dial up its total capex outlay to 3.5% of GDP, from the 3.4% of GDP presented in the interim budget. Given states’ demands, the government could raise the unconditional amount transferred under the 50-year interest-free loan for infrastructure spending.
5) Medium-term economic vision
Since this is the first Budget after the elections, it will be an important platform for the government to establish its medium-term economic vision and the reform agenda, the analysts said. “In particular, we expect the government to present its vision for India to be a developed economy by 2047, and how that translates into specific goals over the next five years,” it said.
Source: Stocks-Markets-Economic Times
