Key factors for investors to consider in Budget 2024...

S Venkateshwari
Key factors for investors to consider in Budget 2024...

There will be no "spectacular announcements" in the upcoming interim Union Budget 2024, according to Finance minister Nirmala Sitharaman. There is a great deal of expectation around infrastructure funding increases, manufacturing incentives, and tax relief measures for MSMEs and salaried individuals. Aside from income tax structure changes, investors need also be aware of changes in capital expenditure growth, the target budget deficit, market borrowings, and subsidies.

Investors should focus on these key factors in Budget 2024:

Tax

Taxpayers anticipate populist measures like raising the basic exemption and house rent allowance exemption under both the new and old tax regimes, notwithstanding difficulty in decreasing the income tax rate due to budgetary constraints. In an effort to support the new taxing regime and streamline the tax code as a whole, Kotak Cherry CEO srikanth Subramanian proposed making changes to the income tax structure.

Capex

The government has raised capital spending (capex) by more than 30% yearly over the past three years, aiming for 3.3% of GDP, the highest level in 18 years. According to Goldman Sachs, positive gross tax collections will allow the government to reach the capital objective in FY24. It does, however, project a deceleration in capital expenditure growth to approximately 10% Year-over-Year in FY25, consistent with the government's medium-term fiscal reduction strategy.

Compared to Rs 10 lakh crore in FY24, Deutsche bank predicts that on-budget capital spending for FY25 will be Rs 11 lakh crore.

Target for the fiscal deficit

ICRA projects that a budget deficit goal of 5.3% of GDP will probably be set for FY2025. This is in the range of the medium-term aim of less than 4.5% by FY2026 and the projected value of 6.0% for FY2024.

Based on the calculations conducted by ICRA, an additional expenditure of Rs 324 billion on capital goods would be possible for every 10 basis points (bps) increase in the fiscal deficit-to-GDP ratio.

According to Goldman Sachs, the government will meet its FY24 budget deficit goal of 5.9% of GDP.

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