BFSI industry showers praises on FM Nirmala Sitharaman
Alok Aggarwala, Chief Research & Investment Officer, BajajCapital Ltd.: “In presenting the Union Budget 2024-2025, Finance Minister Nirmala Sitharaman echoed a resolute commitment to building comprehensive infrastructure at an unprecedented pace, encompassing digital, social, and physical realms. Underlining the nation’s prosperity, Sitharaman emphasised the critical role of empowering the youth, recognizing them as key architects of our collective future.
The budget reflects a transformative approach, with a focus on rural welfare evident through initiatives like the Fasal Bima Yojana and the extension of crop insurance to 4 crore farmers. Sitharaman reiterated the mantra ‘Garib Kalyan is desh ka kalyan,’ emphasising the government’s dedication to the welfare of the underprivileged.
The Finance Minister expressed optimism in the government’s ability to deliver on its promises, particularly in the backdrop of the positive economic transformation witnessed over the last decade. The commitment to supporting electric vehicle manufacturing and charging infrastructure aligns with the government’s vision for a greener and technologically advanced future.
Acknowledging the aspirations of the youth, Sitharaman announced a golden era for tech-savvy individuals, offering 50-year interest-free loans. The focus on expanding Metro Rail and Namo Bharat to more cities, coupled with efforts to enhance housing for the middle class, reflects a holistic approach to urban development.
The fiscal policy outlined in the budget maintains stability, with no changes in direct and indirect tax rates. Sitharaman disclosed encouraging statistics, including a doubled GST tax base and estimated tax receipts of Rs 26.02 lakh crore in FY25. While setting a fiscal deficit target of 5.1% of GDP for FY25, she revised down the FY24 fiscal deficit to 5.8% of GDP.
Looking ahead, Sitharaman foresees the next five years as a period of unprecedented development, navigating a new world order post-Covid. Proactive inflation management has been instrumental in keeping inflation within the targeted band.
In essence, the Union Budget 2024-2025 encapsulates a vision for progress, sustainability, and inclusive development, with a steadfast commitment to meeting the evolving needs and aspirations of the nation.
Trideep Bhattacharya, President & Chief Investment Officer- Equities, Edelweiss MF: “In an election year, the budget adeptly strikes a balance, prioritizing sensibility over populism. It showcases India’s unwavering commitment to infrastructure development, coupled with a steadfast adherence to fiscal prudence. This paves the way for sustained growth, steering the nation along the trajectory towards achieving a developed economy by 2047.”
Chirag Mehta, CIO, Quantum AMC: “There was an expectation that given it’s an election year, the budget could tilt more populist with more support for rural sector. However, contrary to expectations, the government continues to be driven by development and fiscal prudence as the central focus. Given the economic growth momentum , there was need for assuring macroeconomic stability which has been judiciously crafted to give way for fiscal consolidation. The lower tax collection assumption could either be conservative or government signal to assume some growth moderation going forward. The government continues it capital expenditure spending with on Inclusive development with Agri, Infra (including housing) and Green ecosystem as the key thrust areas with an emphasis on Research and Technological developments. There was a need to support manufacturing momentum and way to revive rural economy. However, probably that could be part of the main budget that gets presented in July as government plans to showcase a pathway for Developed India.”
Pankaj Pathak, Fund Manager- Fixed Income, Quantum AMC: “This is a very good budget for the bond market as the government chose fiscal prudence over populist spending. The budgeted fiscal deficit of 5.1% of GDP is lower than even the lowest of market estimates. Faster fiscal consolidation and consequent decline in the government’s market borrowing should drive bond yields lower and bond prices higher. Another positive aspect is that the government has pegged only a moderate growth in the non-capex expenditure. This should keep inflation under check and provide enough headroom to the RBI to cut interest rates. We expect long term bonds to do well in 2024. Investors can capture this opportunity with dynamic bond funds which are invested in long term bonds.”
Sahil Kapoor, Head – Products and Market Strategist at DSP Mutual Fund: It is noteworthy is that this is a budget entirely focused on fiscal consolidation and not populism, which was expected to be in focus because of the upcoming general elections. The most pleasing words from the budget: “No changes in taxation.” It’s a budget that focuses on the continuation of policy and doesn’t introduce any surprises. It’s a budget prepared keeping in mind that global fiscal expenditure may decrease this year, and the global monetary policy may tighten. The government has assumed an increase in total expenditure of 6.1% YoY in FY25. This is the lowest growth in 8 years, and less than half of the 8-year average of 12.4%. The budget has a negative fiscal impulse, with the gross fiscal deficit contracting by Rs. 49,000 crores and the primary deficit reducing by Rs. 1.8 lakh crores. The bond market has rejoiced with a drop in yields, and rightfully so. Gross and net borrowing for FY25 are lower than FY24. The fiscal deficit is expected at 5.1% for FY25, a reduction of 0.7%. With India getting included in global bond indices and the supply of Govt. Securities estimated to be lower, it will lift a major hurdle for the RBI to exercise a more neutral to easy monetary policy – advantage duration funds.
Ajit Banerjee, Chief Investment Officer, Shriram Life Insurance: The interim budget may categorised as a financially prudent budget targeted to achieve the fiscal consolidation in the long term. It clearly stays away from presenting a populist budget in lieu of the upcoming general elections and this exhibits the confidence levels of the present central government.
The Government focus on developing the power sector through a host of renewable energy initiatives, upgrading railway infrastructure to support the Gati Shakti program, and boosting the affordable housing sector would certainly act as a catalyst in achieving the dream of Prime Minister for leading the country into Vikshit Bharat by 2047. The Government also lays emphasis on developing woman empowerment further and making them more financially empowered.
The Government gross borrowing number at Rs 14.13 lacs crore though bond issuance are kept lower after some heavy lifting it has done in fast few years also highlights that it expects the Private Sector now to take the lead in initiating the capex programme as a stable macro environment in the country.
Sandeep Yadav, Head – Fixed Income, DSP Mutual Fund: While we were expecting fiscal consolidation, but the budget took all by surprise by showing a low fiscal deficit of 5.1%. Moreover, the assumptions of nominal growth at 10.5% and tax growth at 12% are very realistic, thus leading credence to the deficit numbers. Govt has shown prudence not just in fiscal deficit, but also in allocation of funds. While the overall expenditure has grown by just around 6%, the capital expenditure has grown by 17%.
We have been bullish on bond yields, and the budget reinforces our view. The domestic demand for bonds will increase as PF, insurance and banks grow. The FPI demand for bonds is all but certain thanks to bond inclusion. In such a scenario Govt has reduced its gross borrowing by more than a lac crore. An increasing demand, and a decreasing supply makes 2024 a good year of bonds. We expect RBI to sell bonds to buffer the sharp fall in yields, however even then the yields fall should be significant.
To conclude it’s prudent budget aimed at bringing fiscal stability in the country.