Unveiling India’s interim budget for 2024, Finance Minister Nirmala Sitharaman struck a balance between pragmatic fiscal consolidation and targeted growth initiatives. The budget exuded stability and strategic direction, prioritising long-term economic well-being.

Macroeconomic stability takes centre stage in this interim budget 2024-25. Its commitment to fiscal prudence shone through, aiming to reduce the deficit from 5.8% of GDP (gross domestic product) to 5.1% FY25. Further, the finance minister reiterated the commitment to achieving a fiscal deficit target of about 4.5% of GDP by FY26. This, coupled with the planned inclusion of Indian government securities in global indices, aims to anchor macroeconomic stability and potentially lower yields for investors, making Indian bonds more attractive. The focus on fiscal discipline is expected to cheer bond investors and contribute to overall economic stability.

The budget also continues with the infrastructure push. That is, infrastructure development remained a key thrust area, with initiatives like upgrading railway infrastructure and building dedicated freight corridors promising improved connectivity and efficiency. However, mindful of fiscal consolidation, the budget anticipates a moderate overall spending increase in the coming year. This measured approach is unlikely to deter the private sector’s investment momentum, which analysts predict will continue its upward trajectory. According to one analyst report, private capex has seen a sharp increase in the past 12-15 months.

The budget 2024 continues to recognise the critical role of rural communities in India’s growth and has allocated resources to bolster the rural economy. Increased access to credit for self-help groups and farmers, along with the continuation of key government schemes and measures to improve the benefit welfare of the farmers, including PM Kisan Samman Nidhi, better prices for agri produce by integrating mandis digitally, de-risking farmers’ profitability through crop insurance and promoting efficient use of fertilisers.

The budget also included targeted measures for specific sectors like affordable housing, electric vehicles, and renewable energy to stimulate growth in these key areas. Additionally, a dedicated Rs 1 lakh crore corpus will be established to promote technology, innovation, and research to foster long-term development.

That said, the withdrawal of petty tax demands offered a small sigh of relief to individual taxpayers as there has been no change in direct tax rates.

Impact on the equity market and outlook

While the recent budget offers positives for the equity market, tempering return expectations is important as some of the optimistic factors are already factored in valuations. So, in the near term, market performance might be moderate.

That said, the market might quickly shift its focus to corporate earnings performance, and the budget’s commitment to long-term stability and strategic direction provides a reassuring foundation for future growth. Analysts anticipate the market to quickly discount the budget and focus on the trajectory of corporate earnings growth, which has remained resilient so far.

In conclusion, India’s interim budget for 2024 presented a clear roadmap for the nation’s economic journey. By prioritising fiscal prudence, investing in infrastructure, and empowering the rural economy, the budget lays the groundwork for sustainable and inclusive growth in the years to come.