Union Budget 2024: Key Sectors to Watch and Expected Announcements
Budget 2024 expectations: Following the conclusion of general elections and the appointment of a new government, all eyes are now on the Union Budget for the financial year 2024-2025. This will be the first Budget announcement by the newly-elected NDA government, led by Prime Minister Narendra Modi, which assumed office earlier in June. This Budget will likely incorporate the elements from the 100-day plan that PM Modi instructed his teams to formulate.
Budget 2024: Date & Time
Finance Minister Nirmala Sitharaman is likely to announce the Union Budget 2024 in July. According to various media reports, the full-year Budget could be unveiled in the second half of July, as the monsoon session is likely slated between July 22 and August 9. The Budget presentation generally begins at 11 a.m. This will be the newly-formed government's first full Budget presentation after the general elections.
Who will present the Union Budget 2024?
Union Finance Minister Nirmala Sitharaman will present the Budget for the financial year 2024-2025. Sitharaman, appointed as the finance minister under the newly elected cabinet under Prime Minister Modi, will present her seventh Budget in a row. She last presented the Budget in February 2024, which was an interim budget since the general elections were scheduled between April and May.
Why are there two Budgets this year?
India will see two Budgets this year. While Finance Minister Nirmala Sitharaman declared an Interim Budget on February 1, she is expected to announce the full Budget for the current financial year next month. During the election year, the finance minister proposes an interim budget since the incumbent government cannot make a full-fledged budget before the poll results. This is what happened earlier in the year, with a short Budget and no Economic Survey. Meanwhile, the upcoming full Budget will include plans for the entire fiscal year, revenue, spending, and economic policies.
Sectors in Focus Ahead of Budget
Here are some of the sectors that investors could track ahead of the presentation of the Union Budget 2024-25:
Infrastructure
Construction of roadways, highways, and tunnels has been a key focus area for the government, with the infrastructure capex estimated to grow at a CAGR of 11.4% over 2021-26. During the interim budget, the government's capital allocation for the infrastructure sector increased by 11.1% to Rs 11.11 lakh crore. An increase in funds for the infra sector has boosted the infrastructure, and capital goods indices by over 200% in the last five years, which is significantly higher than the 98% rise the benchmark Sensex has seen in the same period.
Railways
With the focus on improving logistics and bringing down transportation costs, railways have received massive support from the government by way of increased capex over the years. In five years, the government's capital expenditure on railways has grown by 76%, touching Rs 2.55 lakh crore in February 2024. This is expected to rise to even higher levels by 2030 as the government looks to accelerate capacity growth. In the interim budget, the Finance Minister announced plans to prioritise the development of dedicated tracks for coal and minerals transportation, enhance port connectivity, and alleviate congestion in busy traffic corridors. These initiatives reflect intentions previously stated, and one should look out for funding allocations in the upcoming budget.
Defence
India's defence sector is undergoing an overhaul with the government's thrust on modernisation and indigenisation. To meet this, the government could increase defence capex. Experts from the sector are stressing the need to raise the defence budget to nearly 3% of the GDP to address strategic needs, modernisation demands, and pension funds. Focus on the defence sector has yielded strong returns for investors in the stock market. The Nifty India Defence Index, which was launched in 2022, has consistently outperformed the Nifty50 pack.
FMCG & Auto
Stocks from auto and FMCG sectors are likely to be in focus ahead of the Budget as the government could introduce measures to enhance consumer spending power, especially in the rural areas. The rural economy comprising 70% of India's population has seen a slowdown in growth due to the pandemic, low monsoon, high inflation, and reduced subsidies. The government has an ambitious plan to increase rural per capita income by 50% by 2030. The Budget could see a boost for rural consumption by way of welfare schemes, affordable housing, and other income-boosting measures which in turn could boost sales for FMCG goods, and two-wheelers and tractors. Apart from this, the government could consider tax cuts and suggest reports that could boost consumption and savings.
PSUs
The government may announce privatisation or stake sales for public sector companies during the budget as elections are out of the way and amid the stellar rally stocks from the sector have seen. The BSE PSU index has risen by over 100% as against a 22% rise in the Sensex index in the last one year. However, the government has missed the divestment targets in the last five years.
Solar Energy
The upcoming budget could focus on this sector as India looks to meet 50% of its electricity needs from renewable sources by 2030. The Interim Budget saw a substantial increase in allocation to solar power grids, underscoring the government's thrust. As India aims to meet its projected energy demand of 15,820 TWH by 2040 independently, renewable energy is poised to play a crucial role, making it a significant agenda for the government.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendatory. Investment/Trading in the securities market is subject to market risk, past performance is not a guarantee of future performance. The information mentioned is based on several secondary sources on the internet and is subject to changes. Kindly consult your investment advisor before investing.