Budget 2024 Expectations: Sector-Specific Watchlist for Investors

30 Jan 2024 , 02:38 PM

On February 1, 2024, Finance Minister Nirmala Sitharaman is set to present the final Budget of the Narendra Modi government. Given that this Budget coincides with the Lok Sabha election year, it will be regarded as either an interim budget or a vote on account.

Below-mentioned are the sector-wise expectations from Budget 2024:

Automobile Sector:

• Implementation of the FAME-III incentive policy with a substantial allocation for subsidizing electric vehicles (EVs).
• Decrease in the Goods and Services Tax (GST) applied to lithium-ion batteries.
• Inclusion of hybrid vehicles in the FAME-III incentive policy.

Building Materials and Consumer Electricals Sector:

• Increased funding allocation to projects linked to low-cost urban and rural housing, drinking water supply, smart city development, PLI, PM- Kisan Samman Nidhi.
• Increased capital allocation for government infrastructure projects such as roads, trains, airports, and seaports.
• Lower import duties on vital raw commodities.
• Extending the PLI system to include uncovered product manufacture.
• Improved execution of direct and indirect tax compliance.

Capital Goods Industry:

• The interim budget is anticipated to remain focused on capex, with good growth predicted in the infrastructure sector. Roads, trains, airports, seaports, waterways, and logistics are essential industries that provide significant prospects for capital goods and engineering enterprises.
• With the government’s emphasis on boosting capex activity, business prospects for industrial and engineering firms are anticipated to improve, which bodes well for these companies.

Cement Industry:

• The government’s capex expenditure growth will be lower than in the previous year, as the administration aspires for near-term consolidation.
• Housing and infrastructure projects, which together account for more than 80% of cement consumption in India, may see enhanced allocations.
• Any initiatives aimed at reviving the rural economy would boost rural housing demand.

Defence Sector:

• We anticipate that expenditures will remain consistent, reaching around 2% of FY25F GDP and accounting for approximately 13% of overall government expenditure. The defence purchase budget is expected to expand by 5-7.5%, reaching around ₹1.75 trillion.
• Production and export ambitions: The government is expected to set lofty targets, exceeding ₹1.5 trillion for production and ₹350 billion for exports.

Infrastructure Sector:

• Allocation to infrastructure projects increased 39% YoY in FY23 and 33% YoY so far in FY24. For FY25F, there may be a flat to 5% YoY reduction in allocations.
• Announcements on capital expenditures and infrastructure investments, such as the amount and share of budget spending, new initiatives, and so on.
• We anticipate considerable growth in renewable energy, as allocations have increased by 260% from FY20-24.

Renewable Energy and Clean Tech Sector:

• Government assistance programmes launched last year, such as viability gap funding for battery-based storage systems, are expected to continue. Some new initiatives in green hydrogen, offshore wind power, and biogas are possible.
• In biogas, it is expected that the government would set a minimum price for fermented organic manure. This will increase the viability of biogas facilities, enticing more participants to the industry. Nevertheless, the industry may expect a significant boost from the budget.

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