Interim budget 2024: Here are the expectations from industry experts

As India transitions into an election year, the Interim Budget 2024, to be presented by Finance Minister Nirmala Sitharaman, garners significant attention for its fiscal approach and policy direction.

On February 1, Finance Minister Nirmala Sitharaman will present the Modi 2.0 government's final budget before the April-May Lok Sabha elections. Industry and sector experts have high expectations for the announcement, hoping for beneficial changes across various sectors, including agriculture, infrastructure, healthcare, education, banking, and industry. They seek a budget that encourages growth, fosters innovation, and enhances societal welfare.

Investment Opportunities

According to Namrata Mittal, Chief Economist, SBI Mutual Fund, “This is a vote on account budget implying limited parliamentary discussion on the budget and hence an avoidance to major tax modification. The primary objective is to seek permission to spend and collect receipts until the new government is formed. Although the Finance Minister has categorically called it out as a ‘vote on account’ budget, media and markets continue to be divided on whether more substantial announcements would be made in this interim budget or not. The budget will also be keenly watched to assess the pace of fiscal consolidation, capex quantum, the likely market borrowing and any material delta to the welfare schemes.

Mittal predicts a prioritisation of capital expenditure over populist measures, despite the challenges of balancing credible fiscal arithmetic with moderating nominal GDP growth. The budget is not expected to feature groundbreaking policy announcements but might include unconventional moves.

Marzban Irani, CIO, Fixed Income at LIC Mutual Fund Asset Management Ltd, states "The upcoming Budget will be an interim budget since this year is the election year. Normally, we do not expect any path-breaking policy announcements in an interim budget. But there is always scope for unconventional moves.

From the debt market perspective, the Centre is on course to meet the current fiscal’s (FY24) deficit target of 5.9 per cent on higher GST/ direct tax mop-up. But any extra spending for popularity due to political compulsions will make it tough to meet the target of 5.3 per cent next fiscal (FY25).

The demand-supply mismatch of Central and state government bonds is not in focus now. The Centre aims to borrow a gross of Rs 15.43 lakh crore through the sale of bonds in FY24. Net borrowing is pegged at Rs 11.81 lakh crore.

In my view, the Centre should try to adhere to the fiscal deficit target as it gives a clear signal to global investors. The G-Sec is getting listed on global indices now. The government might announce popular measures before the general election. Although the supply looks similar to last year’s, demand is also strong".

Real Estate Expectations 

The real estate sector, having reached its zenith in 2023, anticipates continued growth backed by a strong macroeconomic climate, stable lending rates, and a buoyant job market.

Shiwang Suraj, Director & Founder of InfraMantra, says “For Budget 2024, we expect the call for enhanced support for affordable housing. This includes amplifying policy frameworks, extending tax incentives, and providing fiscal backing to revitalise the segment and address the housing deficit. Acknowledging the sector's contribution to GDP and its role as a significant employment generator, we echo the sentiment for granting real estate the long-awaited industry status, complemented by streamlined project clearance and GST harmonisation. Such reforms are expected to bolster demand and affordably ease regulatory constraints.”

“Additionally, we also advocate for the elevation of the home loan interest rebate under Section 24, from the current Rs 2 lakh to Rs 5 lakh, to stimulate the market, particularly within the budget housing sector which experienced a downturn in sales due to the pandemic. This, coupled with tax holidays for developers and alternative funding avenues, could catalyse a more resilient housing market.”

“With these measures, we look forward to a budget that not only fosters the real estate sector's growth but also fortifies its foundation for sustained progress in the years to come,” added Shiwang Suraj, Director & Founder – InfraMantra. 

Expenditure for overall growth

Sonal Badhan, economist with the Bank of Baroda, anticipates the government maintaining fiscal consolidation while ensuring quality expenditure. The focus is expected to be on rural growth support due to challenges like weaker monsoons and the Rabi sowing season pressures. Key schemes such as PM-KISAN, MGNAREGA, Housing for All, and free food grains will likely remain pivotal.

“The government is also expected to maintain its emphasis on infrastructure spending. Receipt growth is predicted to align with nominal GDP growth. Given the fiscal consolidation goals and ongoing expenditure, tax cuts seem unlikely, and the borrowing program is expected to stay relatively stable. Inclusion in the JP Morgan EM index could provide additional borrowing options,” asserts, Sonal Badhan.

These expert insights underscore the fine balance the Interim Budget 2024 seeks to strike between fiscal prudence and nurturing growth sectors, setting a foundation for India's economic trajectory in the election year and beyond.