Budget 2024 expectations: From tax cuts to rural sops- 5 top brokerages share what the Union Budget could reveal

Union Finance Minister Nirmala Sitharaman will present the Budget 2024 on Tuesday, July 23, amid high hopes for a pro-growth Budget, which may also include populist measures aimed at boosting consumption and the rural sector economy.

Experts are largely convinced that the government will not shift its focus away from fiscal consolidation. Moreover, it may announce measures to address the issue at the lower strata of society.

SBI economists expect the government to focus on adherence to fiscal prudence and continue on the fiscal consolidation path. However, they believe the government should refrain from obsessing too much over the fiscal stance because it may impact the long-term sustainable growth path.

Due to solid growth in GST revenues along with higher dividends from PSUs and RBI, SBI economists believe that the government may target a fiscal deficit of less than 5 per cent of GDP, maybe 4.9 per cent, for FY25.

We have gathered insights from five leading brokerage firms on their expectations for the Union Budget 2024. Take a look:

BofA Securities

BofA Securities pointed out that the focus is on the government's allocation of $16.2 billion of excess dividend receipts from the RBI and CPSEs (central public sector enterprises). The brokerage firm expects $6.6 billion allocations to stimulate state capex, $9.6 billion towards populism to boost consumption and no change to the FY25 fiscal deficit target at 5.1 per cent.

"Our analysis suggests $6 billion lower than budgeted capex spends in FY24 (low base) and likely $6.6 billion of further capex allocation to states (could be largely towards Telangana and Bihar), which could boost FY25 capex allocations to 23 per cent growth versus 11 per cent estimated in the February 2024 Budget," said the brokerage firm.

It also expects a step-up in rural infra (28 per cent of FY25 budgeted capex): its growth at 13 per cent CAGR in the past five years has lagged overall capex at 27 per cent CAGR.

Besides, BofA Securities said populism led by tax sops for income less than ₹20 lakh per annum (benefits 95 per cent of tax filers) has the potential to drive consumption revival: $9.6 billion equates to nearly 1.5 per cent of the total food and grocery market in India.

Axis Securities

Axis Securities believes the Union Budget 2024 will likely strengthen the narrative of “Viksit Bharat.”

"The Budget will likely strengthen the narrative of "Viksit Bharat" by 2047, following a transformation similar to the one witnessed in the last decade. After the formation of the NDA 3.0 government, expectations from the market are growing towards some allocation for the bottom of the pyramid to address rural challenges, alongside some cutoff on capex spending," said Axis Securities.

The brokerage firm believes that the Budget will likely strike a balance between capex spending and addressing rural challenges. Nonetheless, a higher-than-expected RBI dividend has provided some cushion to move further towards welfare schemes.

"The market is keenly watching developments towards the capital gains tax. Any deviation from market expectations could attract some negative reactions in the short term. However, the chances of this occurring appear slim," said Axis Securities.

The brokerage firm underscored that the impact of the Union Budget on the equity market has reduced notably over the past few years, with the government undertaking most of the reforms outside the purview of the Budget.

Reliance Securities

Strong expectations are running across industries in the forms of sops, PLI schemes, rationalisation of tax structure and relaxations for corporates, GST benefits, revision in income tax slabs on the salaried class, and increase in the 80C deduction limit, which was last reviewed in 2014, aiding higher disposable income, which will augur well for economic growth in terms of strong reforms and policy objectives being getting achieved over the next few years.

The fiscal deficit target may be unchanged at 5.1 per cent for FY25 and 4.5 per cent for FY26.

"We believe the government is expected to strategically utilize the extra windfall one-time dividend received from the RBI to encourage consumption, India’s entry into the global bond index, more flows are anticipated over the next few quarters keeping the yield curve movements anchored, supporting the rupee concerning the dollar and expectations of Fed rate cut in the last quarter of the year," said Reliance Securities.

Kotak Securities

Kotak expects the Union Budget to provide a combination of (1) higher capex targets, (2) higher allocation to the rural and agricultural sectors, and (3) further fiscal consolidation—without shifting away from the existing prudent fiscal policy framework.

"In our view, (1) the RBI’s higher-than-budgeted surplus transfer (additional 0.4 per cent of GDP) for FY25, and (2) strong tax collections in two months of FY25 will allow the government to provide adequate support for capex and incremental support to consumption," Kotak said.

The brokerage firm believes that continued weak consumption demand, especially for low-income households, and disappointing election results may prompt the government to consider incremental welfarism.

Accordingly, the government may increase allocations toward PM-KISAN (higher cash transfers to farmers), rural housing under PMAY (already announced), rural roads under PMGSY, rural employment under MGNREGS increased by increasing the number of working days or wage rates and higher LPG subsidies for women.

Anand Rathi Shares and Stock Brokers

Anand Rathi expects the Budget to be pro-growth and not populist.

Sujan Hajra, chief economist and executive director of the brokerage firm, pointed out that GST, corporate tax and personal income tax each account for nearly 30 per cent of gross tax collection. Yet, each has followed a distinct trajectory since FY19.

"Despite a huge jump in corporate earnings in FY24, corporate tax growth was modest. By contrast, income tax and GST collection recorded better growth rates in FY24 despite low private consumption growth and falling inflation. We expect a deceleration in all major tax categories except corporate tax in FY25 versus FY24," said Hajra.

Hajra expects revenue spending in FY25 to grow by 6 per cent and capital spending by 17 per cent.

"Despite much lower growth, we are factoring in an acceleration of revenue and deceleration of capital spending in FY25 versus FY24," said Hajra.

'Spending on food subsidies and rural development are likely to rise to boost rural India and consumption. Debt servicing cost is also likely to grow substantially," he said.

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