Will Budget 2023-24 be populist or pragmatic? Brokerages weigh in

Will the government go all out to woo voters with populist schemes in its last full Budget before of the general elections in 2024, or will it toe the line of fiscal prudence? What can retail investors and India Inc hope for?

BROKERAGE: Barclays

EXPECTATIONS

We do not expect any material push to increase the pace of fiscal consolidation in a pre-election year. Capital expenditure (capex) can be prioritised amid steady revenue expenditure. The consolidated fiscal deficit will reach 9.9 per cent of gross domestic product (GDP) in 2022-23 (FY23), broadly on track to meet the Fiscal Responsibility and Budget Management Act target.      

BROKERAGE: Goldman Sachs

EXPECTATIONS

Significant reforms are not expected. Watch out for a commitment to fiscal consolidation, capex spending, manufacturing sops, subsidies and welfare, and supply of government bonds that the market can absorb.                                                     

BROKERAGE: DBS      

EXPECTATIONS

Budget to focus on rural India, capex, and manufacturing push, as well as prioritising macro stability. Bond markets will have to contend with a busy pipeline.                                                          

BROKERAGE: HSBC   

EXPECTATIONS

Markets will likely rate the Budget on transparent and credible fiscal arithmetic, improved tax regime, continued capex thrust, support to states, and addressing liquidity and bond market concerns. We expect the fiscal deficit to be in line with the glide path to 5.8 per cent of GDP in 2023-24 (FY24), from a budgeted 6.4 per cent in FY23.                                                            

BROKERAGE: ICRA    

EXPECTATIONS

Fertiliser subsidy levels, savings from the discontinuation of the erstwhile Pradhan Mantri Garib Kalyan Anna Yojana, budgeted capex, and disinvestment receipts to impact Budget mathematics and the extent of fiscal consolidation. See an upside of Rs 2.1 trillion to the Government of India’s (GoI’s) net tax revenues in FY23. GoI’s fiscal deficit likely to exceed the Budget Estimates by Rs 80,000 crore.                                                            

BROKERAGE:  Morgan Stanley              

EXPECTATIONS

We expect FY24 fiscal deficit to narrow to 5.9 per cent, FY24 capex spending to rise to 2.9 per cent of GDP, focus on job creation, and access to infrastructure. Factors that will have a maximum impact include a credible fiscal deficit target, spending plans versus fiscal consolidation, and changes to long-term capital gains.                                                         

BROKERAGE: Nomura             

EXPECTATIONS

Some income-tax tweaks are possible; not pencilling in a populist Budget. Focus areas could include support for consumption, a strong focus on manufacturing, especially micro, small and medium enterprises, higher infrastructure, agriculture and rural spending, and asset monetisation. See gross FY24 borrowings at around Rs 15.5 trillion (Rs 14.2 trillion in FY23).               

BROKERAGE: UBS      

EXPECTATIONS

Rural spending boost by around $10 billion (plus 15 per cent on-year) and double-digit growth in public capex (plus 20 per cent on-year). Even though policymakers’ rural/agriculture tilt is real rather than rhetoric, it is still likely to be within the fiscal limit.                                                      

Source: Research reports