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The Union Budget truly exemplifies the government theme of “India First, Citizen First”. The inclusive development approach was clearly visible through leveraging the digital infra for multiple utilities, accelerating investment cycle via robust allocation, green growth, which will catalyse the multiplier effect on the economy. On the fiscal front, the glide path on reducing fiscal deficit has been complied with as fiscal deficit is likely to go down to 5.9% in FY24E vs. 6.4% in FY23. Medium term target of 4.5% fiscal deficit by FY26 is also on track. Most importantly, the Budget also provided some ease to middle-class tax payers under the new tax regime (likely to boost overall consumption) and no negative surprise on LTCG, which was indeed a welcome move.

Key highlights of Budget:

• On the fiscal deficit front, the glide path on reducing fiscal deficit has been emphasized with fiscal deficit likely to go down to 5.9% in FY24E vs. 6.4% in FY23. Medium term target of 4.5% fiscal deficit by FY26 is also on track. Direct tax revenue growth of 10.5% for FY24E is in tandem with the nominal GDP growth of 10.5%. GST revenue growth is pegged at 12%

• Focus on capex remains priority: Capex spending remains the key area of focus with government capex allocation growth at 33% YoY in FY24BE to | 10 lakh crore led by sectors like railways, roads, defence, housing, water (Jal Jeevan) and metro projects. The capex to GDP is pegged at all-time high of 3.3%. The two sectors that stand out in terms of allocation are Railways (up 51%) and roads (up 25%). The Budget has also focused on accelerating the green energy spectrum in order to reduce the carbon footprint. The major announcements being Green Hydrogen and providing assistance of | 8300 crore to the Ladakh Renewable project enabling investment of | 20000 crore, which will have a multiplier effect across the capex value chain. Given 50% of the total allocated capex is earmarked for Railways and roads is a clear indication on structurally bringing down overall logistics costs in the economy, which are currently at 14% of GDP and increase competitiveness and scale of Indian exports

• Reducing import dependence: Reduction of customs duty on mobile components (such as camera lens and its parts) from 2.5% to nil and on open cell for TV from 5% to 2.5%. For the Gems & Jewellery sector, the Budget has also made provision of grants to encourage indigenous production of lab grown diamonds (LGD) seeds & machines and to reduce cost of production via abolishing of basic customs duty on imported seeds used for LGD

• Disinvestment target for FY23RE revised downward to | 50,000 core vs. earlier budgeted target of | 65000 crore. For FY24E it is pegged at | 51,000 crore, which, we ,believe is a conservative estimate

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