The government indicated that it will do the heavy lifting to drive capex, in the absence of private sector capex. It announced tax reliefs and benefits for small businesses, all aimed at driving inclusive growth. But the biggest challenge will be global economic headwinds, with a recession looming
Sitharaman used all the right buzzwords to revive investor confidence Image: Adnan Abidi/ Reuters
Finance Minister Nirmala Sitharaman presented a frills- and surprise-free Budget for FY24, aimed at driving economic growth in a global scenario, where a recession looms large for most large economies. India, in that backdrop, appears well placed, compared to Western economies, with the country estimated to grow at 6.8 to 7 percent for the 12 months ending March 2023.
Sitharaman used all the right buzzwords to revive investor confidence: Including a higher government capex allocation of Rs10 lakh crore, sops for small businesses through a Rs9,000 crore corpus for a revamped Credit Guarantee Scheme, revamping income tax slabs for individuals and maintaining fiscal deficit prudence. For SME businesses, which are seen as a lifeline for the economy, through job creation, it is being seen as a big booster.
Rahul Bijoria, chief economist at Barclays India, says the FY24 Budget “sets realistic revenue targets and prioritises expenditure prior to an election year, and proposes modest fiscal consolidation, along expected lines”. Investors cheered all these moves after the Budget announcements, with the BSE Sensex gaining over 1,128 points or 1.89 percent to a high of 60,767.04 points in early afternoon trade before losing most gains—due to corporate-related news—at the close.
The FY23 fiscal deficit was broadly retained at 6.4 percent of GDP, with the FY24 deficit pegged at 5.9 percent of GDP, broadly in line with market forecasts. “The government maintained its intention to meet the medium-term fiscal-deficit consolidation glide path, and expressed confidence about reducing the fiscal deficit to 4.5 percent of GDP by FY26,” says Bijoria.
Umang Papneja, CEO of Julius Baer, is confident with the fact that the government has taken the responsibility to do the heavy lifting when it comes to government capex spending, due to higher inflation and slower growth in those regions.