First Budget Of Modi 3.0: The Budget 2024 Likely To Reflect 'Policy Continuity' With Economic Growth Agendas

The first Union Budget of PM Modi's government after their third win, is just around the corner. The Budget FY25 is likely to reflect 'policy continuity' with a focus on economic growth agendas such as infrastructure push, fiscal discipline and capex 'quality' expenditure capex continuity.

Milind Muchhala, Executive Director, Julius Baer India on Thursday said, "The Final Budget 2024 is likely to tread on the lines of the direction provided in the interim budget, with the government retaining its focus on fiscal discipline while continuing with the 'quality' expenditure capex/infrastructure agenda."

Muchhala highlighted that the Government's economic growth agenda has been premised on the three pillars of (i) Promoting Domestic Manufacturing, (ii) Infrastructure Development, and (iii) Improving Disposable Income/Consumption.

Hence, he believes that "The Union Budget is expected to largely reflect the policy continuity to support this growth agenda, although some greater focus can emerge to revive domestic consumption, especially post the election mandate."

Among the key focuses of the Budget, will be on recording better fiscal balances and generating space for higher social spending, while it could also provide some sops for the middle-class and rural segments to aid revival in consumption, Muchhala added.

Also, as per Muchhala, the government's focus on public infrastructure to drive capex growth is expected to continue with emphasis on improving domestic infrastructure and increasing the domestic manufacturing base, which could involve tweaking existing production-linked incentive (PLI) schemes or bringing new sectors under its ambit.

According to him, domestic manufacturing clearly remains one key focus area of the Government, both for import substitution as well as positioning India as a 'factory to the world', as it will not only help in employment generation and overall development, but also be highly supportive for the currency, while also leading to the much-needed revival of the private capex cycle.

Additionally, he said, Tourism (including Medical tourism) could also emerge as a focus area in the budget. Lastly, the markets will also track for any significant changes in taxation structure and hope that there are no incremental negatives (adverse tax changes on capital gains).

Meanwhile, SBI Research in its latest note said that the Government should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, but at the same time refrain from obsessing too much over the fiscal stance (with FD estimated around ~4.9% in FY25 budget as per SBI projections) as it may come in the way of long-term sustainable growth path, by striking the right balance by limiting the consolidation to 20 bps (at max) this fiscal.

SBI Research added that the estimated decline in both Gross, as also Net market borrowings of GoI, in FY25 (Rs 13.5 lakh crore and Rs 11.1 lakh crore respectively) should also come as an enabler for the GoI's glide path for fiscal prudence/ consolidation.

The Budget session is likely to begin on July 22nd and will continue till August 12. Finance Minister Nirmala Sitharaman will present the Budget for the financial year 2024-25.

That being said, the Budget 2024 announcement is scheduled on July 23. The 2024 Budget will be Sitharaman's seventh Budget, highest by any finance minister.