Interim budget 2024: India bets on infrastructure & CapEx for growth

India is getting ready for elections, and the new Interim Budget is like a money plan for the country. It's designed to help India grow and be stable without making big changes in the rules. The government wants to be fair and follow the Election Commission's rules while determining how to spend money wisely.

## **Empowering the nation: GYAN approach**

The Finance Minister, Nirmala Sitharaman, is focusing on four main groups - the poor (Garib), youth (Yuva), farmers (Annadata), and women (Naari). She wants to help the country move forward by giving ₹34 Lakh Cr directly to PM-Jan Dhan accounts, helping the poor without involving middlemen or dealing with fraud. At the same time, the Skill India Mission is training 1.4 Cr young people to have better skills and more power.

Farmers are getting money directly through PM-KISAN SAMMAN Yojana and protection for their crops under PM Fasal Bima Yojana. This helps them stay strong economically. Also, there's a focus on supporting women entrepreneurs by providing 30 Cr in Mudra Yojana loans, which fits with the bigger goal of creating a society where everyone feels included and has power.

## **Vision 2047: Foreign capital and infrastructure development**

The big aim is to develop India by 2047, calling it 'Viksit Bharat.' This means we want a lot of money from other countries, like the $596 billion that came in from foreign investments between 2014 and 2023. We're planning to spend a good amount, around ₹11.11 Lakh Cr, on building things like roads and buildings, which is 3.4% of our GDP. But we're being careful about how we spend this money, making sure we handle it responsibly.

The fiscal deficit, a crucial metric measuring the gap between government earnings and expenditure, is targeted to narrow from 6.4% in FY23 to 5.1% in FY25 after reducing FY24’s deficit to 5.8%. This marks a significant fiscal turnaround, signaling the government's commitment to financial prudence.

Upcoming Sectors highlighted in the budget

1. **Blue revolution:** The focus on India's international trade through sea transport lays the groundwork for a Blue Revolution. Restoration work and a dedicated Department of Fisheries aim to double seafood exports, providing potential growth opportunities for related industries.

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2. **Edible oil import cut:** Strategies to reduce oil import dependency from 60% to 30% signal a shift in the domestic production landscape. Companies in the oilseed sector, especially mustard producers, may see increased demand and investment.

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3. **Deep tech in defence sector:** The allocation of ₹1 Lakh Cr for defense technology R&D opens doors for companies involved in advanced technologies, creating opportunities in artificial intelligence, machine learning, and robotics.
4. **Rooftop solarization:** With India leading the global renewable energy revolution, the Pradhan Mantri Suryodaya Yojana offers opportunities for companies in the solar sector. One crore households seeking rooftop solarization could spur growth in the solar industry.
5. **Cervical cancer vaccination:** The endorsement of HPV vaccination may impact pharmaceutical companies involved in vaccine production, leading to increased demand for these life-saving vaccines.

## **Key takeaways and market reaction**

The budget's focus on strong fiscal consolidation has provided support to fixed-income markets. Yields on the 10-year government paper fell by nine bps to 7.06%, reflecting investor confidence in the government's commitment to fiscal responsibility.

Equity markets remained range-bound, with no major triggers from the budget announcements. The financial sector benchmark Bank Nifty Index, however, went up by 0.4%, anticipating benefits from fiscal consolidation.

## **What it means for investors**

While not making headline-grabbing announcements, the interim budget signals a commitment to strong fiscal consolidation. By avoiding populist measures and emphasizing fiscal responsibility, the government clearly indicates its policy intent. Investors should consider the changing dynamics, especially in fixed-income markets, where opportunities for building duration may arise as money market rates are expected to head lower in the second half of 2024.

As the budget sets the stage for a positive macroeconomic picture, short-term rates may trend downward, presenting a favorable environment for fixed-income investors. The unexpected reduction in gross market borrowing and the government's commitment to fiscal prudence further enhance the investment landscape. While equity investors might find limited immediate impact, fixed-income investors can strategically position themselves to harness the evolving dynamics of the Indian yield curve.

## **Conclusion**

India's Interim Budget 2024 prioritizes infrastructure development and fiscal consolidation while offering targeted support to key demographics like farmers, youth, and women. The budget aims to attract foreign capital and focuses on strategic sectors like maritime trade, import substitution, defense technology, and renewable energy. This approach fosters long-term growth for India's economy (Vision 2047) while promoting financial responsibility. While equity markets showed a muted response, focusing on fiscal discipline has boosted fixed-income markets, presenting potential opportunities for investors seeking long-term returns. The budget lays the groundwork for a stable macroeconomic environment and responsible fiscal management.

Discover the highlights of India's Interim Budget 2024, focusing on infrastructure and capital expenditure for stable growth in an election year. The GYAN approach targets empowerment for the poor, youth, farmers, and women. Vision 2047 aims at foreign capital and infrastructure development with careful fiscal management. The budget highlights upcoming sectors, including the Blue Revolution, reduced edible oil imports, deep tech in defense, rooftop solarization, and cervical cancer vaccination. Strong fiscal consolidation positively impacts fixed-income markets, presenting opportunities for investors. Explore what the budget means for investors, with a focus on fiscal responsibility and potential benefits for fixed-income strategies in the evolving Indian market.

Interim budget 2024: India bets on infrastructure & CapEx for growth

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