Upcoming Interim Budget Set to Unveil Decade-Long Report Card of Modi Government

In a much-anticipated move, the upcoming interim budget is poised to conduct a thorough evaluation of the central government's performance over the last decade. Positioned as a pivotal moment, the budget is expected to introduce measures to provide relief to the middle class, counter inflation, sustain vital subsidies, prioritize agricultural development, boost the manufacturing sector, and advance the saturation of welfare schemes. Additionally, it will reaffirm the government's commitment to achieving a $5 trillion economy by 2027-28.

The budget is projected to highlight the two-decade-long Viksit Bharat road map. Insiders with knowledge of the preparations suggest that the interim budget, often referred to as the vote on accounts, will serve as a platform for the government to reiterate its economic vision. The primary focus is anticipated to center on women, youth, farmers, and the economically disadvantaged, including scheduled castes and tribes. This strategic alignment coincides with the imminent parliamentary polls scheduled for the summer, positioning the budget as a key move in addressing critical demographics and garnering support.

Insights and Expectations:

Pankaj Pathak, Quantum AMC: "The interim union budget for 2024-25 is scheduled for presentation on February 1, 2024. Traditionally, the government refrains from announcing major policy changes ahead of Union elections. Therefore, the market's focal point is likely to be the government's fiscal deficit target and market borrowing numbers. With the Indian economy exhibiting steady growth, the government is expected to continue its fiscal consolidation plan, aiming to reduce the fiscal deficit to 4.5% of GDP by FY 2025-26. Based on this trajectory, the fiscal deficit target for FY 2024-25 is estimated to be around 5.3% of GDP.

Borrowings from the bond market in FY25 may be lower than last year by approximately Rs. 500-700 billion. Projections indicate gross market borrowing of around Rs. 14.8 trillion and net market borrowing of approximately Rs. 11.2 trillion in FY25. The reduced market borrowing, coupled with rising demand from long-term investors such as Provident Funds (PF), pension funds, and insurance companies, creates a favorable demand-supply balance for government bonds. India's inclusion in global bond indices is expected to further boost demand, potentially leading to an outpacing of supply in 2024. Consequently, bond yields are expected to decrease, and bond prices are likely to move higher, with long-term bonds showing greater sensitivity to yield changes, performing better in 2024."

Sumanta Kar, CEO of SOS Children’s Villages India: "The upcoming 2024 Budget presents a valuable opportunity to prioritize the well-being of India's most critical demographic—its children. We anticipate an increase in the budget allocation for child welfare, which would be a positive development. Investments should be directed towards empowering stakeholders to take action in children's education, health, and skill development. Special attention is needed to strengthen the educator workforce through training and skill development, in alignment with Mission Poshan 2.0. Higher budgetary provisions for mental health, well-being, and child protection are also essential. It is crucial that these measures consider the needs of children who have lost parental care or are at risk due to multiple vulnerable situations. Implementing these measures could have a significant impact on our country's future."