Union Budget 2024: Continued Capex with Fiscal prudence

The recent budget revealed that the government has opted to maintain the status quo which is understandable for an interim budget. However, they have also not been populist in an election year- a positive sign. Noteworthy remarks from the Finance Minister emphasized the visible impact of comprehensive development across all sectors, pointing to macroeconomic stability, including in the external sector, robust investments, and the overall positive performance of the economy.

Private sector investments are improving; lower borrowings by the Central Government will facilitate a larger availability of credit for the same. This is getting reflected in the movement of Bond Yield which fell 10 bps today to 7.045%. This shall lower the cost of borrowing for banks and the next quarter's results shall also reflect treasury gains.

Government capital expenditure is growing on an already high base, the fiscal deficit is under control, tax collections are buoyant and overall consumer sentiment is strong. Macros are looking stable for a foreseeable period and our portfolio is well aligned for developments in the Banking, Power, and Healthcare sectors. Investors should stay invested and use every opportunity to deploy additional funds.

Key Sectoral Announcements:

Infrastructure Sector:

• The capital expenditure outlay, which has seen a significant threefold increase over the past four years, yielding a substantial impact on economic growth and employment creation, is set to rise by 11.1% to Rs. 11.11 lakh Crore (3.4% of GDP) for the next fiscal year.
• The PM Awas Yojana (Grameen) successfully met its target of constructing 3 crore houses. An additional 2 crore houses will be built over the next five years to accommodate the increasing number of families.

Railway Sector:

• The government plans to implement three major economic railway corridor programmes, namely energy, mineral and cement corridors; port connectivity corridors; and high traffic density corridors.
• A conversion of 40,000 standard rail bogies to the Vande Bharat standards is underway.
• These initiatives, along with dedicated freight corridors, are expected to spur GDP growth and reduce logistic costs.

Power Sector:

• An initiative for rooftop solarization aims to enable 1 crore households to receive up to 300 units of free electricity each month.

Green Energy:

• Viability gap funding will be provided to support the development of offshore wind energy.
• A goal has been set to establish a coal gasification and liquefaction capacity of 100 MT by 2030.
• The government will introduce phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic use.

Healthcare:

• The healthcare cover under the Ayushman Bharat scheme will be extended to include all ASHA workers, Anganwadi Workers, and Helpers.

Agriculture:

• Following the successful adoption of Nano Urea, the application of Nano DAP on various crops will be expanded across all agro-climatic zones.
• The government will continue to promote both private and public investment in post-harvest activities to ensure the sector's rapid growth.
• Under the Pradhan Mantri Matsya Sampada Yojana (PMMSY), there is an aim to double exports to Rs. 1 lakh crore.

Research and Innovation:

• An allocation of Rs. 1 lakh crore will be made available, offering 50-year interest-free/low-interest loans to encourage significant scaling up of research and innovation in sunrise domains by the private sector.
• A new scheme is set to be launched to enhance deep-tech technologies for defense purposes.

Budget Estimates 2024-25

For FY 2024-25, total non-borrowing receipts (tax collections, dividends from RBI & PSUs and divestment) are estimated at Rs. 30.80 lakh cr, while total expenditure is projected to be Rs. 47.66 lakh cr. Tax receipts are expected to amount to Rs.26.02 lakh cr. The government remains committed to fiscal consolidation, aiming to reduce the fiscal deficit to below 4.5% by 2025-26. For FY 2024-25, the estimated fiscal deficit is 5.1% of GDP, still aligning with the path towards fiscal improvement. The gross and net market borrowings through dated securities during 2024-25 are estimated at Rs. 14.13 and 11.75 lakh cr respectively. Both will be less than that in 2023-24.