Budget 2023 - Fiscal Deficit Pegged At 5.9% Of GDP For FY24 Amid Surge In Capex: ICRA

ICRA Research Report

Amid the global growth slowdown and an uneven domestic recovery, the Union Budget for FY2024 has prudently raised the high-multiplier capital spending to a massive Rs 10.0 trillion, while simultaneously pursuing fiscal consolidation, aided by the cushion provided by a sharp decline in the subsidy burden.

Moreover, it focused on increasing the outlay on Green Growth policies, while providing tax benefits to economic agents, including citizens, micro, small and medium enterprises and cooperatives. The estimates for revenue receipts and disinvestment appear mildly optimistic.

Overall, the Government has estimated an appreciable narrowing in its fiscal deficit to 5.9% of gross domestic product in FY2024 from 6.4% of GDP in FY2023, while reiterating its commitment to reaching sub-4.5% levels of GDP by FY2026.

Budget 2023 and its impact on various sectors

Aviation:

• The Union Budget for FY2023-24 has reiterated its focus on improving regional air connectivity through setting up of 50 additional airports, heliports, water aerodromes and revival of advance landing grounds, which will boost domestic air travel.

• The Budget also provides a lot of thrust on promotion of tourism through development of tourist destinations covering various aspects, and further through development of theme-based local tourist spots. All the relevant aspects would be made available on an app to enhance tourist experience. This will not only promote domestic tourism but also international tourism and, hence, international air travel.

• Thrust on promoting domestic tourism under the Dekho Apna Desh initiative and Swadesh Darshan Scheme, will in turn push higher regional travel, which will be further complemented by the focus on better regional connectivity. All these initiatives are expected to boost air travel – both domestic and international.

Cement:

• The GoI’s focus on agri-economy and rural development is expected to support income for farm households and thereby support demand for rural housing, which is a significant contributor (of around 30%) to the overall cement demand.

• Improved access to housing in low to mid-income segments under PMAY and the continued focus on PMAY allocation a positive for the cement sector.

• The infrastructure sector accounts for 20-25% of the total cement demand. The increase in budgetary allocation underscores the focus of the Government on the infrastructure sector.

Pharma and Healthcare:

• Given the backdrop of the Covid-19 pandemic and under-penetrated healthcare infrastructure in the country, increased allocation towards the healthcare sector is a welcome move.

• Roll-out of new programmes to promote research and development in pharmaceuticals is a progressive step towards improving public-private partnerships and overall thrust on R&D.

• Setting up of new nursing colleges and introduction of courses for medical devices are expected to increase availability of skilled manpower in the healthcare and medical devices sectors, a positive given the severe shortage of skilled manpower in India compared to the global average and other developing nations.

• Increase in allocation towards Pradhan Mantri - Ayushman Bharat Health Infrastructure Mission reflects intent of the Government to increase health coverage in the country, however, as the actual expenditure on PMABHIM in FY2023 was far lower than the budgetary allocation, the spends in FY2024 vis-a-vis the budgetary allocation will remain a monitorable.

Click on the attachment to read the full impact of budget 2023 on various sectors:

More Research Reports On Budget 2023 Reviews, Highlights

• Budget 2023 Review - Keep The Engine Chugging Along: Dolat Capital

• Budget 2023 Review - Accelerating Capex To Retool Economy: ICICI Direct

• Budget 2023 Impact On Personal Tax, Automobiles, Railway And More: IDBI Capital Analysis

• Budget 2023 - A Budget For All: CareEdge Analysis

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