Although its stock markets hit fresh record highs at the beginning of January, they now see a correction in anticipation of the Interim Union Budget 2024. Therefore, the Union Budget declaration itself directly affects the stock market because it reveals the government policies and financial plans that reveal future prospects in different areas.
Until the Union Budget is announced on 1 February, it seems that the stock market will remain in a state of flux. For the past five days, BSE Sensex has recorded a fall of more than 2 percent moving toward the 71400 mark. However, the NSE Nifty 50 declined by a further margin of a decrease in points with an approximation value of minus 2.
With the Lok Sabha Elections happening in May, this would be their last budget before that and thus it is going to be a non-event; but what happens post-elections will be more of a long-term policy vision that talks about what wants government thinks.
However, Deepak said that there may be some buildup of expectations before the vote on account and major reforms could get delayed to June/July in the 2024 regular budget.
This has also been suggested by the finance minister in December of the next year. The account vote could be short of any huge unveiling or the sizeable preferential treatment to the populace. The government is thus likely to remain on the fiscal correction glide path in the Interim Budget for FY25, refraining from any populist spending or incentives at an election time during the summer.
Income Tax Rules
Jasani noted that there would be no dramatic changes, but Sitharaman could decide to make some simplify in income tax regulations. She is likely to increase the standard deduction, and basic exemption limit and spur manufacturing through additional benefits albeit in a negligible capacity of closing the deficit gap.
The new taxation framework for the personal income tax can be made much more appealing by widening either the exemption limit, increasing rebates under Section 87A or even simplifying the highest surcharge rate.
While slashing the income tax rate may look impossible due to fiscal constraints, it is still hoped that there would be some populist announcements like an increase in the basic exemption and house rent allowance exemption under both new regimes. There might even be certain adjustments within the structure of the Income Tax regime for preference from the New Regime over the existing one to simplify it presently
Sectors In Focus
Therefore, sectors like railways, defense and infrastructure power renewable auto manufacturing real estate etc will remain under focus in this interim budget. According to analysts, the government is expected to go ahead with manufacturing incentives alongside the infrastructure-related capex in India and design a roadmap for disinvestments.
In the recent past, in a bid to increase the capex spending by over 30 percent CAGR for three decades, the government has raised its budgeted target of almost USD95 billion which is equivalent to about 3.3% of GDP – the highest witnessed in more than one and half decade.
Nikunj Saraf, the Vice President at Choice Wealth said that despite the fact technically both the real estate sector and banking & financial services sectors are likely to outperform in January before the budget. Concentrating on the area of affordable housing within real estate, this issue is treated as an essential one for economic development. The aspiring industry status for the real estate sector can potentially shape the related industries. Other areas such as manufacturing and also renewable power may be given more stimulus.
They include sectors like agriculture and rural which are related to fertilizers, affordable housing small finance banks two-wheelers, etc. where the upcoming general elections may need some announcements for the benefits of the rustic economy lower income class.
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