The Budget for 2024-25 focuses on investment and stability
The Finance Secretary, TV Somanathan, highlights the level of investment and macroeconomic stability in the Budget for 2024-25. He believes that the capital expenditure allocation is appropriate and sufficient to sustain economic growth. Despite the uncertain private sector investments, Somanathan is confident that the current growth rate will be maintained.
State support and conditionalities for capex
Somanathan mentions that the capex support provided to states in the Budget will be continued for one more year. However, he suggests that the conditions for this support may differ from the previous year. He explains that the guidelines for state capex will be reassessed to promote new initiatives and policies.
Rekindling private sector investment
Somanathan acknowledges that multiple factors affect the private sector investment cycle. While bank credit to Indian industry is lower than that in China, efforts are being made to clean up bank balance sheets and corporate books. The Budget also supports production linked incentive schemes and private sector projects in innovative sectors. Somanathan believes that these initiatives, combined with macroeconomic stability, can create a favorable investment climate in the long term.
The housing scheme and its details
The Finance Secretary mentions that the housing scheme announced in the Budget is still being designed. However, he reveals that it will support deserving sections of the middle class by providing cheaper loans for acquiring houses. The scheme may include interest subvention or lower-cost loans through priority sector credit schemes.
Allocations to states and conditionalities
Somanathan explains that the allocations to states come with conditions to achieve specific goals. The aim is to stimulate capital investment for infrastructure projects and incentivize state-level reforms. While some states may choose to comply with the reforms, it is not a prerequisite for receiving the funds. The specific reforms may differ from the previous year.
Expenditure compression and revenue sources
Despite undershooting in certain schemes and capital expenditure, the Budget has seen buoyancy in tax revenue and non-tax revenue sources. Non-tax revenue, including dividends from RBI and PSUs, has increased substantially. The Finance Secretary expects non-tax revenue to be slightly higher in the next year, attributing it to telecom revenue and other sources.
Analyst comment
1. Positive news: The Budget for 2024-25 focuses on investment and stability.
Short analysis: The market is likely to respond positively as the budget emphasizes investment and stability, which could lead to economic growth.
2. Neutral news: State support and conditionalities for capex.
Short analysis: The market impact will depend on the specific conditions for state support, but overall, it is expected to have a neutral effect.
3. Positive news: Rekindling private sector investment.
Short analysis: The market is expected to respond positively as the budget includes initiatives to boost private sector investment, combined with macroeconomic stability.
4. Positive news: The housing scheme and its details.
Short analysis: The market is likely to respond positively as the housing scheme aims to support the middle class with cheaper loans for acquiring houses.
5. Neutral news: Allocations to states and conditionalities.
Short analysis: The market impact will depend on how states respond to the conditions, but overall, it is expected to have a neutral effect.
6. Positive news: Expenditure compression and revenue sources.
Short analysis: The market is likely to respond positively as tax revenue and non-tax revenue sources have shown buoyancy, indicating potential growth in the coming year.
