growth: Calibrated steps avoid populism, prioritise growth: Anand Radhakrishnan

Furthering the efforts to boost the economic resilience considering the global growth moderation, the Union budget FY24 attempts at calibrated steps in the right direction. Focus on infrastructure boost and capital spending, along with fiscal prudence is a big positive. The budget rightly avoids populist measures in the pre-election year and prioritises long-term growth.

Fiscal consolidation for FY24 continues to adhere to the projected glide path with a sub-4.5% target by FY26. While the tax buoyancy levels appear reasonable, expenditure assumptions on multiple heads are projected conservatively, especially in a pre-election year and will be monitored closely.

A moderate rise in market borrowings is positive and could keep the bond yield movements in a narrow range. Linking part of the state fiscal deficit to power sector reforms is welcome.

A significant increase in the proposed capex outlay with a lower focus on fiscal transfers and subsidies is encouraging and indicates a continued improvement in the quality of spending, a key positive for enhancing productivity and investment. Announcements for boosting multimodal seamless connectivity, logistics sectors and thrust on urban infrastructure development augur well for the infrastructure growth.

The budget has addressed the affordable housing sector with a reasonable increase in outlay for PMAY, a positive for housing and ancillary sectors.

While the budget has considered the supply aspect of the economy through focus on infrastructure and domestic manufacturing, it also aims to boost demand through some much-needed relief to taxpayers.

Other measures like plugging tax-arbitrage in income from high-ticket insurance policies, capital gain tax on market linked debentures may dampen sentiments in the short-term but are moves in the right direction.Given the need to build sustainable growth momentum, the budget delivers in terms of bolstering quality of spending, higher infrastructure development, continued focus on manufacturing and digital thrust. These measures should help support India’s current growth momentum and possibly boost it further.

We expect domestic-focused sectors, including housing & construction, discretionary spending like auto & consumer durables, infrastructure (road, railways) and banking to show resilient performance, supported by macro tailwinds.