Investing in the Future: Budget 2024’s Impact on Financial Markets

Following the announcement of the interim Budget, the Indian stock markets traded more or less flat as there were no shocks or surprises for the market– rather the focus was kept on inclusive growth and prosperity with fiscal prudence.

Finance Minister Nirmala Sitharaman highlighted the substantial progress of the Indian economy over the past decade, noting effective inflation control measures that have maintained inflation rates within acceptable limits. India’s Real GDP is projected to grow by 7.3% in FY2023, in line with upward revision made by the Reserve Bank of India during December 2023. Additionally, there was a notable increase in GST collections for January 2024, rising by 10.4% to exceed ₹ 1.72 lakh crore, reflecting vigorous economic activity. Meanwhile, global markets showed varied responses, with the US markets experiencing a downturn on Wednesday. This mixed financial landscape underscores the dynamic nature of global and Indian markets, influenced by domestic policies and international economic conditions.

The Budget presents encouraging fiscal indicators, with a notable decrease in the fiscal deficit to 5.8% of GDP in FY2024, a slight but significant improvement from the initially projected 5.9%. This move and the aim to further reduce the deficit to 5.1% in FY2025 reflects a strong commitment to fiscal responsibility.

Private sector gets lucky with funds availability

Total Capex outlay is projected at ₹11.11 Lakh Crores, equivalent to 3.4% of GDP with major outlay towards roads and railways. The decrease in government net borrowings is a positive sign, as it increases the availability of funds for the private sector at a cheaper lending rate, potentially boosting economic growth. Collectively, these measures signify a strategic approach to enhancing financial stability and supporting sustainable development.

Financial Stability and ease of Investment

The budget strategy, coupled with integrating Indian bonds into the global bond fund index, presents a significant opportunity for lowering the yields on Government Securities. This development is advantageous for the bond market and predicts well for the Indian equity market, signaling a positive outlook for investors and market participants. Specifically, public sector banks benefit from this Budget due to their substantial bond holdings. Moreover, the Budget made targeted announcements to favor sectors such as infrastructure, tourism, and logistics, highlighting the government’s commitment to bolstering these areas. Additionally, the emphasis on housing in the Budget is a boon for the cement industry and other building material sectors, indicating a broader impact on the construction and real estate sectors. This multifaceted budgetary approach aims to stimulate growth across segments of the economy, reflecting a strategic effort to enhance financial stability and foster development in key areas, thereby contributing to the country’s overall economic prosperity.

Energy Initiatives

Under the PMS Awas Yojana, the announcement of free rooftop solar system installations for one crore impoverished households, is set to reduce electricity expenditure significantly. Any surplus generation can be sold to distribution companies for income. This initiative will offer entrepreneurship opportunities for supply & installation and employment opportunities for youth with technical skills in manufacturing, installation and maintenance.

Together, these measures aim to uplift the economically disadvantaged and propel India towards a brighter, more innovative future.

Prioritization of Investment and Innovation

This Budget embodies a balanced and constructive strategy to foster economic growth and ensure financial stability. It prioritizes investment and innovation, steering clear of populist measures in anticipation of the upcoming general election. Focusing on careful fiscal management alongside growth stimulation showcases a well-thought-out plan in response to the present economic conditions. This approach seeks to invigorate the economy and maintains a responsible stance on budgeting, reflecting a commitment to sustainable development and economic resilience.–

Skill India Mission

The government’s budget allocation to Skill India Mission through 2014-23 is a testament of their commitment to have a skilled workforce with more than 1.4 crore youth trained under various programs. In addition, to support the entrepreneurial spirit of the youth, 43 crore loans have been sanctioned under the PM Mudra Yojana. The Government’s extension of certain tax benefits to Start-ups and investments made by sovereign wealth funds/pension funds to March 2025, is also progressive in spirit.

A standout budget feature complements this initiative: allocating a ₹1 Lakh Crore fund for 50 years, offering low to zero interest rates specifically for research and development in sunrise sectors. This strategic financial support is poised to revolutionize India’s innovation landscape, potentially transforming the country.

Gender equality and the opportunity to get quicker funds

The budget announcement marks a significant stride towards empowering women to achieve excellence in their professional and academic pursuits. With an impressive allocation of 30 crore Mudra Yojana loans dedicated to women entrepreneurs, the government aims to bolster the growth of women-led micro-enterprises, thereby enhancing their contribution to the national economy. This financial support is expected to pave the way for a more robust participation of women in the business sector, reflecting a commitment to gender equality and economic inclusivity.

The increase in female enrollment in higher education by 28%, particularly in STEM (Science, Technology, Engineering, and Mathematics) courses, is a testament to the strides towards gender inclusivity in academic fields traditionally dominated by men. Indian Women now constitute 43% of total enrollment – one of the highest in the world. This progress is crucial for building a more diverse and innovative workforce that drives national development in various sectors.

Furthermore, the Budget’s emphasis on improving the ease of living and ensuring dignity for women entrepreneurs acknowledges the unique challenges they face in business. This approach indicates a shift towards creating a more supportive and inclusive entrepreneurial ecosystem for women entrepreneurs.

A piece of advice for investors

Following the announcement of Budget 2024, it’s recommended that investors take a strategic, long-term stance, concentrating on industries expected to benefit from new government policies. With the market adjusting to the Budget’s effects, investors must diversify their investments, targeting industries likely to benefit from the government’s emphasis on sustainable growth and digital innovation. Being well-informed and flexible is essential for successfully managing post-budget market changes. This approach will mitigate risks and position investors to capitalize on emerging opportunities in sectors aligned with government priorities, ensuring a robust investment strategy in the dynamic economic environment.

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