Interim Budget: Giving India New Direction
With a new definition to GDP (Governance, Development and Performance), with a sharp focus on fiscal consolidation, the interim budget has demonstrated that the direction of the government is on long term growth. Fiscal deficit to GDP at 5.1 per cent for FY25 along with outperformance in FY24 at 5.8 per cent (versus 5.9 per cent target) demonstrates government’s commitment to not go the populist way. But at the same time, focus on the four pillars of social governance viz. poor, women, youth and farmers, government’s direction in Amrit Kaal is towards an inclusive growth with is sustainable and non-inflationary. Capex growth estimated at 11.1 per cent is reasonable. Market borrowing is lower for FY25 versus FY24. In the era where the global world is struggling to rein in fiscal deficit and borrowing, India adopting the path of consolidation and reduction in borrowing showcases its macro stability.
With a strong government policy in place, experts say, one can look forward to higher growth and a more modern, digital India in the near future. The FM speech has clearly indicated the government’s resolve to move forward with more development and reform-related policies, coupled with all-round infrastructure development across the country.
Anand Ramanathan, Partner and Consumer, Products and Retail sector Leader, Deloitte India says the budget has prioritised housing, tourism and infrastructure spending which will have a multiplier effect on consumption across middle income households. “The focus on growth and productivity in agriculture will also help the rural economy. Exports will grow from the focus on aquaculture and import substitution in oilseeds. Overall, the budget will benefit FMCG and consumer durable companies from a growth in rural and middle-income household consumption,” says Ramanathan.
Fiscal, Tax Measures
Rumki Majumdar, Economist, Deloitte India terms the announcement of keeping a fiscal deficit of 5.8 per cent of GDP, 0.1 per cent lower than the Budget Estimate (BE) of last year as a 'significant announcement'. "It is 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," she said. Then the FM’s announcement to do away with and withdraw old outstanding tax demands of up to Rs 25,000, which are still appearing in the government’s books as ‘outstanding tax demand’, will also provide relief to a large section of small and mid-level taxpayers, says Sanjay Sanghvi, Partner, Khaitan & Co.
The FM speech puts the FY25 gross market borrowing pegged at Rs 14.13 lakh crore is lesser compared to current fiscal year budgeted borrowing of 17.86 lakh crore. "Lesser borrowing by the government will be beneficial for the private sector and households as it will put more money on the table for them," says a senior economist.
Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA says the higher than expected capex (FY24: Rs 9.5 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 per cent vs. 6.0 per cent and FY25: 5.1 per cent vs. 5.3 per cent) 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," Nayar adds.
Boots to Housing
Gaurav Karnik, Partner and Real Estate Leader, EY India terms the budget announcement a positive for the real estate sector. “FM announced that 2-crore more houses will be built under the PM Awas Yojana scheme in the next five years and new scheme for enabling middle class who are currently living in rented premise to build or buy their own houses will be implemented. This should also provide an impetus to the ancillary sectors such as cement, steel etc.”
Agrees Ashish Puravankara, Managing Director, Puravankara. “For real estate, the announcement to help the middle class living in rented homes, slums, and unauthorised colonies buy or build their own houses will provide further impetus to the strong housing demand. Increased focus on transit-oriented development and expansion of metro rail systems in cities, along with strengthening the electric vehicle ecosystem, will encourage people to settle in the peripheries of the urban centres,” says Puravankara.
Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure says it is clear that the government is focused on driving GDP, Governance, Development, Performance, Keeping Inflation under check. “The high points still remain the increased Capex and emphasis on affordable housing. I am hopeful and looking forward to the budget 24-25 in the coming months for the big picture," Dutt added.
Infra Spending
The FM announced a modest 11.1 per cent increase in India's infrastructure spending, aligning closely with the nominal growth estimate. "To address the challenges of deteriorating infrastructure, India must consider a more substantial increase in investment rather than a reduction," says Pradeep Gupta, Co-founder & Vice-chairman, Anand Rathi Group.
Nilaya Varma, Co-Founder & CEO, Primus Partners, hails the announcement of long-term funding for research. "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,” says Varma.
Moin Ladha, Partner, Khaitan & Co says 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 GCC region,” he adds.
Going the Solar Way
The solar rooftop scheme announced by the FM will be a big boost to not only meet our goals for clean energy, but will also set up India to start addressing the EV charging infrastructure that is currently holding back wider adoption of EVs, experts say. "It will also create enormous jobs for installation, manufacturing and maintenance of solar infrastructure and a secondary effect will be opportunities available for startups to build on this," says Mayuresh Raut, Co-founder & Managing Partner, Seafund. Mayank Bindal, Founder & CEO, Snap E Cabs (EV Cabs) says he is thrilled by the government's commitment to bolster the electric vehicle (EV) ecosystem through robust support for manufacturing and charging infrastructure. "This visionary initiative not only accelerates the transition to sustainable transportation but also fosters innovation and job creation within the EV sector," Bindal adds.
Industry Speak
Announcements on viability gap funding for offshore wind energy and allocations for solar rooftop projects will support development of the whole industry, says Sumant Sinha, Founder, Chairman and CEO, ReNew. “The announcement of the corpus of Rs 1 lakh crore for R&D in sunrise sectors sets a positive tone for the future, encouraging us to accelerate our investments and innovations in renewable energy technologies," he adds.
Welcoming the budget. Nirmal K Minda, Chairman & Managing Director, Uno Minda says he is happy that this budget supports the ecosystem of EVs and the necessity of the development of a greener, more sustainable automotive industry. "The government's commitment to supporting manufacturing and charging infrastructure aligns seamlessly with our dedication to driving innovation and sustainability in the automotive sector," Minda adds.
N Venu, MD & CEO, India & South Asia, Hitachi Energy says the interim budget can provide the required impetus to maintain sustainable growth across sectors. “We commend the government's steadfast commitment to environmental sustainability and the ambitious goal of achieving 'Net Zero' by 2070. The focus on supporting offshore wind energy through viability gap funding and developing coal gasification and liquefaction capacity demonstrates a proactive approach to diversifying our energy sources,” Venu added.
