Budget 2024 Expectations: Capex, Welfare among key focus areas of Govt, says CareEdge

19 Jul 2024 , 02:53 PM

According to CareEdge (CARE Ratings), the Union Budget 2024 may continue to focus on capital expenditure (capex) to support growth, despite potential increases in allocations for the rural economy and social packages.

The rating agency forecasts FY25 revenue expenditures to increase by 6.8%, exceeding the planned growth of 4.6%. The allocation will be about ₹750 Billion greater than the Interim Budget forecast.

The government’s capex plan for FY25 is projected to remain at ₹11.1 trillion, up 17% from FY24. MNREGA, PM Awas Yojana, PM Gram Sadak Yojana, PM Kisan Samman Nidhi, and programmes relating to labour-intensive MSME industries are among the major schemes/ministries that may receive more funding, according to a CareEdge note.

The rating agency also expects the government to focus on divestments that have missed their aims for the last five years.

According to CareEdge, the government is expected to meet its FY25 target of ₹500 Billion in miscellaneous capital collections, including divestiture. However, reaching this goal requires the government to undertake large-scale divestments.

CareEdge believes that if divestment slows down owing to challenges, the government will maintain its focus on asset monetisation. Shipping Corp, Pawan Hans, NMDC Steel, and CONCOR are all potential divestment targets.

Four Key Themes of Budget

CareEdge anticipates that the Budget will be based on four important themes: job creation, capital expenditure with an emphasis on self-reliance, climate change and sustainability, and financial services.

Financial Services:

CareEdge expects the government to take initiatives to increase deposit inflows into the banking sector. Furthermore, the government may consider decreasing holdings in chosen public sector banks to meet listing requirements.

Some public-sector general insurance businesses require capital infusion. CareEdge stated that the insurance market needs reforms such as a composite license, micro insurance, IND AS, and so on in order to reach the goal of insurance for all.

Job Creation:

The government may focus on creating jobs in the textile, hospitality, tourism, real estate, and infrastructure sectors.

The government may implement a PLI scheme for cotton-based clothing and garment manufacture. CareEdge stated that this would also assist in enhancing our exports.

CareEdge anticipates initiatives to promote the hospitality and tourism industries by classifying the hotel industry as ‘infrastructure’ and the travel and tourism sector as ‘industry’. Additional incentives such as tax breaks or subsidies to encourage investments in sustainable tourism would have a substantial positive impact on the travel and tourism industries.

In the real estate industry, CareEdge anticipates greater funding for PMAY/affordable housing programmes.

Increased project wins in the PPP (public-private partnership) and EPC (engineering, procurement, and construction) modes can strengthen the infrastructure industry and create jobs.

Capital Expenditure:

CareEdge anticipates that the government will promote a domestic manufacturing ecosystem for renewable energy through a combination of budgetary support, subsidies, tax cuts, and PLIs.

In keeping with the interim budget, roads and highways could receive a 5-7% increase in funding, with a focus on improving coastal road connectivity. According to CareEdge, the railroads could receive a financial allocation of 12-15%, up to ₹2.75 Lakh Crore.

Climate Change:

To boost renewable energy, CareEdge anticipates that the interstate transmission system (ISTS) charge waiver will be extended beyond June 30, 2025.

It also expects beneficial changes to the ethanol policy, particularly for the use of sugarcane juice and B-heavy molasses for ethanol production, to help the government achieve its objective of 20% ethanol blending in gasoline.

It is also expected that the FAME-II and EMPS 2024 schemes will be extended in order to expedite the uptake of electric vehicles.

Reduced GST rates on lithium-ion batteries will help with the transition to EVs, while tax breaks for hybrid vehicles will stimulate their adoption alongside EVs, according to CareEdge.

For feedback and suggestions, write to us at [e-mail]