Interim Budget 2024: Top 10 Reactions From Economists & Market Experts

Today in Parliament, the Union Budget 2024 was presented by Finance Minister Nirmala Sitharaman. There were no major announcements made since this was an interim budget and it was released prior to the Lok Sabha Elections, but it did carry out PM Modi's goal of a "developed Bharat by 2047." These are the top ten reactions from economists and market experts.

Madan Sabnavis, Chief Economist, Bank of Baroda

The Budget has stuck to the task of following the path of fiscal prudence and indicated 5.1% as the deficit target for FY25. Given that the government was able to maintain the deficit ratio at 5.8% instead of 5.9% for FY24 even though the denominator was lower, it does look a pragmatic target. It does look likely that the target of 4.5% will be achieved in FY26.

Within the confines of the fiscal space that is available, the government is channelling enough for capex which is almost 40% of the additional total outlay. This is being directed to roads, railways and defence and it can have positive linkage effects with industries like steel, cement, capital goods etc. the states would continue to get around Rs 1.3 lakh crore from the centre and would be expected to also ramp up their spending.

From the banking perspective, a lower gross borrowing programme augurs well as there will be less pressure on the system for deployment of funds. Also given that more FPI will flow to GSecs, they can use their funds for financing credit.

Achala Jethmalani, Economist at RBL Bank

The fiscal consolidation is premised on an improved Revenue-Capital expenditure mix of the government along with fairly conservative tax and Nominal GDP assumptions. FY25 fiscal figures make the budget fiscally prudent, but not fiscally austere in nature. The fiscal consolidation and the commitment to reach the fiscal deficit-to-GDP levels of 4.5% by FY26 augur well for economy and the rates market, in particular.

Motilal Oswal, MD & CEO, Motilal Oswal Financial Services Ltd

The government has presented a very prudent Budget/Vote-On-Account for FY24-25. In an election year where stakes are very high, government has resisted the temptation, once again, for populism and instead shown excellent strategic sense by opting to continue on the path of fiscal consolidation.

The government is building in a 10.5% nominal GDP growth for FY25, a healthy 12% growth in revenue receipts. However spending growth is just 6%, within which revenue spending is expected to grow just 3% while the more productive capex spending is expected to grow 17% to INR 11.1 Trillion

The government's commitment to a 4.5% Fiscal Deficit by FY26 is indeed commendable. Towards that effect, it has pencilled in a fiscal deficit of 5.1% for FY25, better than most economists' estimates. This augurs well for overall economic credit creation as indeed for inflation and private capex revival.

The 17% increase in Capital Expenditure allocation on the back of a 3x increase over FY19-24 (from INR 3 trillion to INR 9.5 Trillion) indicates the continued thrust of the government towards infrastructure creation and driving the private investment cycle.

What is a bit of a dampener, however is lack of any big push for consumption. Consumption has been weak, especially in Rural India, as indicated by corporate earnings for last few quarters. The budget doesn't provide any near-term solution for quick revival for consumption.

I continue to remain bullish in the medium to long term.

Ashish Gupta, CIO, Axis AMC

While we did not expect any major announcements in this budget, the lower fiscal deficit coupled with higher capex outlay will aid continued momentum of India growth story. Both of these moves are enablers for a pickup in private capex cycle.

Raghav Iyengar, CBO, Axis AMC

Bringing down fiscal deficit, higher capex and people focused, inclusive development will go a long way in boosting India's long-term growth story.

Shreyash Devalkar, Head Equity, Axis Mutual Fund

It's more an affirmation of the intent of the government, the capex outlay has been increased which is a positive. The government's focus on infrastructure and housing will create a multiplier effect on the economy, maintaining a fiscally prudent budget.

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Company Ltd

Budget 2024 is a Holistic Budget exemplifying fiscal prudence and encompassing all the imperative sectors despite electoral compulsions. This budget gives credence to government's unwavering resolve to adhere to the fiscal consolidation glide path, especially after having delivered robust growth-oriented budget in the last 3 years. The vision under Vikasit Bharat by 2047 and top 4 priorities laid out with respect to empowering Poor, Women, Youth and Farmers will go a long way in manifesting the long- term growth story of India. It is high on optics, low on spending impact as fiscal consolidation remains its paramount focus.

The key announcements on power sector coupled with new energy, railways, defense, affordable housing is indeed encouraging. While optically 11% capex growth seems lower than 30% avg growth seen in the last 3 years, but it yet sticks to 3.4% of GDP, which is indeed credible as it would continue to give the requisite infra led push to sustain the growth momentum. Clearly the budget lacks any consumption and populus measures and is thus a departure from the previous pre-election Vote on Accounts.

Fiscal consolidation focus, and low market borrowing reinstates the focus on macro-stability. With lower capex growth being the new reality , markets are likely to align to the pragmatic approach of the government and we reckon more policies being elaborated in July 2024 Budget. Bonds are likely to be in a favorable spot through 2025, thanks to the strong Fiscal prudence and lower borrowing pressures coupled with supportive FII flows with global bond inclusion. Overall, the government has dexterously done a fine balancing act between adhering to fiscal prudence and giving requisite support to growth, despite being a Pre-Election Budget.

Roopali Prabhu, CIO and Head of Products and Solutions at Sanctum Wealth

As expected, the interim budget was a directional policy intent of the incumbent government ahead of the elections. Fiscal deficit control and glide path was the most significant announcement. The revised estimates for FY24 fiscal deficit came in at 5.8% which is 10bps lower than the budgeted estimate of 5.9%. Moreover, the same for FY25 is estimated at 5.1% of GDP (and 4.5% in FY26). Lower government borrowing implies private sector won't get crowded out. This is important at a time where private investment is beginning to scale.

Capital outlay for FY25 is budgeted to increase by 16.8% against the downward revised number for FY24 (revised from Rs. 10 Tn to Rs. 9.5 Tn) with the downward revision being a minor disappointment in the budget. The focus continues on inclusive development and infrastructure and housing in line with expectations. The budget further provides for a meaningful boost to innovation and tourism through long term financing and interest-free loans to the states. Many of the measures will aid job creation which is important considering Indian demographics.

George Alexander Muthoot, MD of Muthoot Finance

FM's interim budget is balanced from the point of view of adhering to fiscal prudence, boosting infrastructure growth and prioritizing focus on four key sections of the economy - the poor, women, youth and farmers. We believe the FM's focus on higher outlay for infrastructure will help in boosting the broader economy and in the long term will boost investment activity.

The government's support to MSMEs, women entrepreneurs and the agricultural sector aptly aligns with our aim to provide credit support to MSMEs, small business owners, farmers and women entrepreneurs thereby addressing their economic needs. FM's focus on addressing housing challenges by building two crore additional homes under the PM Awas Yojana-Grameen is certainly positive for boosting the housing sector. While inflation has been a concern globally, FM's focus on staying on the path of fiscal prudence in the interim budget, will surely be an enabler for stable interest rate scenario in the economy and bodes well for the overall financial sector.

Murthy Nagarajan, Head-Fixed Income, Tata Asset Management

The Fiscal deficit of 5.1 and total gross borrowing is Rs 14.13 Lakh crores, the total net borrowing is at Rs 11.75 Lakh crores. The Nominal Growth in expected to be 10.5 % and tax revenue growth is expected to grow by 11.93%, which is a conservative estimate. The total non-tax revenue has been budgeted at Rs 1.53 Lakh Crores same as last year. The numbers look realistic as the assumption are realistic.

The capital expenditure is targeted at Rs 11.11 lower than market expectation of Rs 12 Lakhs. The Finance minister stated they want to get fiscal deficit below 4.5 % in 2025-26. This is anti-inflationary budget in an election year as the fiscal deficit is reduced from 5.8 percent to 5.1 percent.. The finance ministry is clearly aiming for rating upgrade with aggressive fiscal deficit reduction target as we are at investment grade rating. The ten-year yield have come down to 7.05 to 7.08 levels from 7.15 levels. Further drop in yields is expected due to flows from foreign institutional investors and expectation of India's rating upgrade.