Citing the government's 'Vikisit Bharat' agenda, Morgan Stanley's report on budget expectations predicted that the focus will be on job creation supported through capex and targeted social sector spending.
The report about the Union budget 2024 for the fiscal year ahead, states, "With fiscal prudence guiding the overall fiscal policy stance, we expect the focus to remain on capex expenditure over revenue expenditure and targeted social sector spending with a focus on improving access to physical, social and digital infrastructure."
"In addition, the budget could also give a road-map for a medium-term plan for fiscal consolidation beyond F26," the report, released on Wednesday, added.
It also predicted volatile times ahead for the stock markets. "As of now, the market seems to be approaching the budget with exuberance and could be dealing with both volatility and a correction post budget, if history is a guide," it stated. It also predicted that the markets "could be surprised" by the lack of major tax cuts or redistribution spends. It cautioned that currently we are "overweight" on sectors like Financials, Consumer Discretionary, Industrials and Technology but "underweight" for all other sectors.
Sitharaman is scheduled to present the full Budget for fiscal 2024-25 on July 23.
The report, titled 'India Economics & Strategy - Asia Pacific - What to Expect from Budget F2025’, expects that the government will aim to maintain a fiscal deficit target of 5.1 per cent of GDP, aligning with the interim budget and underscoring its commitment to sustainable economic growth.
"The fiscal headroom has improved with a larger-than-expected transfer of surplus from the RBI, which, in our view, will help to maintain the momentum on capex expenditure and increase targeted welfare spending. In this context, we see the possibility of a slightly lower fiscal deficit target (tad below 5.1 per cent of GDP), given the support from tax and non-tax revenues," the report stated.
In an optimistic macro trends view of the economy in the coming fiscal year, the report stated, "We maintain our constructive view on the economy supported by strong fundamentals. The economy is benefiting from the confluence of cyclical uplift from the strong position of private sector balance sheets and the structural uptrend from policy measures. We expect growth to be sustained at 6.8%, inflation to moderate to 4.5%, and the current account deficit to remain range-bound at 1-1.5% of GDP in F25."
Union Budget 2024 | Making a record for any Finance Minister, Nirmala Sitharaman will be presenting her 7th Union Budget on July 23, 2024 under the Modi 3.0 government. While inflation has burnt a hole in the pockets of 'aam janata', will this Budget spell relief for Indians? Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.