'Prudent, not populist' with a positive fiscal deficit surprise – market watchers, economists praise Interim Budget 2024

Finance Minister Nirmala Sitharaman presented the Interim Budget for 2024 before the country heads for general elections later this year. As expected there were no major announcements. However, the FY25 fiscal deficit target of 5.1% versus the revised estimate of 5.8% for FY24, has been welcomed by market watchers. Moreover, the FY25 capex outlay has been increased by 11.1% to ₹11.11 lakh crore. The FY25 capex outlay is now at 3.4% of GDP.

Reactions by market watchers and economists


1. The higher than expected capex (FY24: Rs. 10.0 trillion vs. Rs. 9.3 trillion and FY25: Rs. 11.1 trillion vs. 10.2 trillion) and lower than projected fiscal deficit (FY24: 5.8% vs. 6.0% and FY25: 5.1% vs. 5.3%) suggest that the quality of expenditure is going to be healthier than what we had pencilled in both in FY2024 and FY2025. Faster fiscal consolidation and a dip in borrowings will help to cool yields further over the coming year, as long as the estimates for revenue and capital receipts appear credible as the year progresses.

- Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd


2. There was an expectation that given it’s an election year, the budget could tilt more populist with more support for rural sector. However, contrary to expectations, the government continues to be driven by development and fiscal prudence as the central focus. Given the economic growth momentum , there was need for assuring macroeconomic stability which has been judiciously crafted to give way for fiscal consolidation. The lower tax collection assumption could either be conservative or government signal to assume some growth moderation going forward. The government continues it capital expenditure spending with on Inclusive development with Agri, Infra (including housing) and Green ecosystem as the key thrust areas with an emphasis on Research and Technological developments. There was a need to support manufacturing momentum and way to revive rural economy. However, probably that could be part of the main budget that gets presented in July as government plans to showcase a pathway for Developed India.

- Chirag Mehta, CIO, Quantum AMC


3. The government aims to boost the e-vehicle ecosystem by supporting the manufacturing and charging infrastructure. Additionally, it aims at greater adoption of e-buses for public transport networks. This would promote environmental sustainability by reducing carbon emissions, contributing to cleaner air, and lower pollution levels. Olectra Greentech, JBM Auto, Tata Motors, and Ashok Leyland stand to benefit from this initiative.

- Siddhesh Mehta, Research Analyst, Samco Securities


4. As anticipated, the Interim Budget 2024 made no big-bang announcements, but it continued its focus on infrastructure upgrades and building connectivity across the country. This will benefit real estate growth in not just the top cities but in tier 2 & 3 cities across the country.

- Anuj Puri, Chairman - ANAROCK Group

5. Long term funding for research is most welcome. This is critical for India to drive IP based growth, which is the future. This combined with Atmanirbhar for defense, fledgling defence Industrial complex and quality of education at premier colleges would allow India to become a research and product nation.

- Nilaya Varma, Co-Founder & CEO, Primus Partners

6. The government announced a fiscal deficit of 5.8% of GDP, 0.1% lower than the Budget Estimate (BE) of last year. This was a significant announcement, sending a clear message to investors that the government maintains control over its finances and remains committed to the fiscal consolidation path it has established.

- Rumki Majumdar, Economist, Deloitte

7. The Vote on Account is citizens pride and peers envy. It has achieved the impossible trinity of inclusive growth ( through support to agriculture, rural housing, fisheries and micro finance for SHGs ) , infrastructure investment ( enhanced allocation ) and fiscal prudence.

- Nilesh Shah, MD - Kotak Mahindra AMC

8. The interim budget today took another big step forward in the remarkable journey of macro-economic stability that has been underway for some time now. We had dwelled on these in a recent communication including on the important implications that these may have for bond investors. While it was important to appreciate the context of the higher central government deficit of the past few years, it was nevertheless considered as probably the weakest aspect of India’s overall macro-economic story. With the 80 bps fiscal consolidation on budgeted fiscal deficit between FY 24 to FY 25, and the finance minister’s stated commitment to attain less than 4.5% deficit in FY 25 (implying at least another consolidation of 60 bps), India has now solidly ringfenced this aspect of our macro-economic story as well.

- Suyash Choudhary, Head – Fixed Income, Bandhan AMC

9. India’s entry into the Kartavya Kal has been announced with the India Middle East-Europe trade corridor which supports India’s unfettered commitment to national development and ambitious vision to transform into a developed nation by the centenary of its independence in 2047. This corridor is expected to positively impact and facilitate world trade and India’s trade in the GCC region.

- Moin Ladha, Partner, Khaitan & Co.

10. The finance minister has rightly chosen the path of fiscal consolidation. The aim to bring the fiscal deficit down to 5.1% of GDP for FY25 is lower than general expectations of 5.2-5.4% and that is very heartening. The minister is showing strong intentions, ahead of the election year, to adhere to the fiscal consolidation path which will be well received by rating agencies as well as the global investors that are eyeing India as an attractive investment destination.

- KVS Manian, Whole time Director, Kotak Mahindra Bank

11. 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.

- Murthy Nagarajan, Head-Fixed Income, Tata Asset Management


12. Eliminating outstanding tax demands below 25,000 up to FY 2009-10 and below 10,000 up to FY 2014-15 is a welcome move. This shows that the government is using their database effectively. While the Budget speech refers to the increase in the number of taxpayers by 2.4times and of a good direct tax collection and a stable GST implementation, that positivity is yet to be passed on to the middle class. Hence there can be some disappointment in personal taxation among the salaried class. As this is an interim budget, let’s hope that there would be scope for realistic reduction on individual tax in the full budget.

- Mini Nair, Chief Financial Officer, Geojit Financial Services

13. The Government has walked the path of fiscal prudence, and it is heartening to note that the fiscal deficit target for FY24, pegged at 5.8%, will be overachieved. The fiscal deficit being pegged at 5.1% for FY25 is a positive move as it will help free up space for private borrowings as they pick pace during the year, besides helping in containing inflationary pressures and supporting the bond markets. There has been no change on the taxation front, and we will have to wait for the full budget for any changes, with the government sticking to the norm of not making major announcements in an interim budget. The additional allocation of INR 1.1 trillion for capex, taking it to INR 11.1 trillion, should provide continuity in the pace of infra creation and in bringing down the logistics cost in the country progressively.

- Ranen Banerjee, Partner and Leader Economic Advisory, PwC India