Preview Report on Budget preview – Capex intent to remain intact by JM Financials Research Team
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Union Budget 2024-25 (scheduled on July 23, 2024) would be crucial given that it would be the first full year budget of NDA 3.0 would lay the foundation for India’s economic/infrastructure/social development for next decade. From the upcoming budget, we expect that the government would strike a balance between fiscal deficit, capex for growth and social spending. The continuation of existing capex agenda (infrastructure, railways, defence, renewable/clean energy), higher budgetary allocation to revive rural economy, job creation and roadmap for 'Viksit Bharat' by 2047 would be the key themes for the Union Budget 2024-25. Markets would be keenly awaiting any adverse changes in the capital gain tax on equities. In case there is no change in capital gain tax it would be considered positive for Indian equity markets.
* Capex to remain at forefront while balancing fiscal deficit: Government is likely to continue its capex plan of Rs 11.1 Lakh Crore for FY25 as announced in interim budget with aim to keep fiscal deficit target unchanged at 5.1% of GDP (versus 5.8% of GDP in FY24) with aim to reach 4.5% of GDP in FY26E. Government’s capex focus would continue to remain on defence, railways and infrastructure development given government vision of 'Viksit Bharat' by 2047. Continuity of pro-reform agenda like PLI schemes and incentivizing clean energy (RE, green hydrogen) would aid revival in private capex as well as job creation.
* Focus on measures to revive rural economy: The record dividend of Rs2.11 lakh crore received by the government from RBI would provide headroom to spent on welfare measure to revive rural economy with higher spending on government programmes like the Pradhan Mantri Awas Yojana (housing for all) and PM Kisan (financial support for farmers). Likely government welfare schemes and recent moderation in the inflation bodes well for recovery in rural economy.
* Key budget picks – Mahindra & Mahindra, Hero Motocorp, ITC, Sumitomo Chemical, RIL, Power Grid, NTPC, Sanghvi Movers, Bharat Electronics, Bharat Forge, VA Tech Wabag, L&T, DLF, Ambuja Cement, APL Apollo, PFC, IRCON
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