Indian Budget Review by Radhika Rao, DBS Group

Radhika Rao, DBS Group

The 2023-2024 Union Budget has received positive feedback from majority of financial experts. While stock markets haven't been trading strong these days due to global factors, the impact of budget on Indian economy is expected to be positive. India FY24 Budget views from Radhika Rao, Senior Economist at DBS Group Research follow.....

The central government’s FY24 Budget was growth supportive whilst sticking with a modest glide path for consolidation. The underlying math was reasonable as it factored in the upcoming moderation in nominal GDP
growth, and lower tax buoyancy, whilst prioritising long-gestation capex spending. This is the last full Budget ahead of general elections in 1H24. Accompanying sectoral announcements were a mix of tweaks to the
personal income tax brackets (to provide support to the salaried class), changes in custom duties to support local manufacturing, and targeting green transition goals, which was balanced by higher allocation towards MSME credit guarantee schemes, skill upgradation and other inclusive welfare goals. The medium-term path of further fiscal rationalisation remains in place as the government reinforced its target of lowering the deficit to -4.5% of GDP by FY26.

Outlay on major schemes: Digging deeper, outlays towards support schemes are a mixed bag. For instance, allocations towards the rural employment scheme, MNREGA, is lower at INR 600bn vs revised INR 894bn in FY23. On the other hand, PM Awas Yojana (housing) is up at INR 795bn vs INR 771bn (FY23 RE).

Green transition: The National Green Hydrogen Mission (outlay INR 197bn) is expected to facilitate transition of the economy to low carbon intensity, reduce dependence on fossil fuel imports, and make the country assume technology and market leadership in this sunrise sector. Separately, INR 350bn has been set aside towards energy transition and net zero objectives, and energy security by Ministry of Petroleum & Natural Gas.

Bond markets witnessed kneejerk gains as FY23 gross borrowings was not raised and FY24 issuance was within expectations. Gross borrowing for FY24 has been set at INR 15.4trn vs INR 14.2trn in FY23 RE and INR 11.8trn on net basis (vs INR 11.1trn in FY23 RE).

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