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The upcoming Union Budget 2024, scheduled for July 23, is anticipated to be a growth-oriented budget, with a strong emphasis on revitalizing the rural economy, boosting capital expenditure, and fostering investment-driven growth, according to the brokerage house Motilal Oswal (MOSL). This budget holds significant importance as it marks the first budget following the 2024 General Elections. While the BJP remains in power, their reduced majority in the parliament amplifies the anticipation and scrutiny surrounding this budget.
MOSL expects the government to continue its commitment to capital expenditure and investment-led growth, aligning with its efforts to reinvigorate consumption. The projections for tax and non-debt capital receipts, as presented during the Interim Budget in February 2024, are likely to be maintained. This suggests a continuation of the government's fiscal prudence and focus on long-term economic growth.
The brokerage has identified 18 key stock picks across various sectors that are expected to be positively impacted by the budget announcements. These stocks are categorized as follows:
Capital Goods and Infrastructure: L&T, Siemens, NTPC
Defense and Railways: Bharat Electronics (BEL), Hindustan Aeronautics (HAL), and Rail Vikas Nigam Ltd (RVNL)
Rural: M&M, Supreme Industries, and Dabur
Manufacturing: Tata Motors, Kaynes Tech and Exide Industries
Real Estate, Cement, and Building Materials: Godrej Properties, KEI Industries, and Ambuja Cement
PSUs: GAIL, SBI, and HUDCO
Beyond these specific stock picks, a critical aspect of the budget is the anticipated transfer of ₹2.11 lakh crore from the Reserve Bank of India (RBI) to the government. This transfer represents excess receipts of approximately ₹1.5 lakh crore for FY25. MOSL expects a significant portion of these additional receipts to be allocated towards various expenditures, while a smaller portion may be used to reduce the fiscal deficit.
MOSL projects that a substantial amount, in the range of ₹30,000-40,000 crore, could be utilized to lower the fiscal deficit to 5 percent of GDP. This aligns with the goal of fiscal consolidation, bringing it down from the 5.1 percent of GDP announced in the Interim Budget. Additionally, an estimated ₹30,000-40,000 crore could be allocated as capital expenditure loans to states, bolstering the Centre's overall capital spending.
The brokerage also anticipates an increase in the installments under the PM-KISAN scheme by 50 percent, bringing the annual payout to ₹9,000 per annum. This measure would require an additional ₹30,000 crore. The remaining ₹50,000 crore could be directed towards offering incentives for taxpayers, potentially through schemes related to housing or other initiatives, encouraging them to switch to the new tax regime.
In recent years, the BJP government has earned a reputation for financial transparency and a commitment to minimizing wasteful spending and corruption. This focus has resulted in increased transparency in the budget process, a reduction in off-budget expenditures and borrowings, a higher allocation for capital expenditure, and a consistent adherence to fiscal prudence. MOSL anticipates that this philosophy will continue, ensuring policy continuity.
However, the brokerage acknowledges that the coalition nature of the government might present challenges in passing legislation for more ambitious reforms in areas such as agriculture, land, labor, and judiciary. These reforms often fall outside the scope of the budget, and securing consensus among coalition partners can be a significant hurdle.