Budget 2024: Strategic Focus on Fiscal Prudence and 'Viksit Bharat 2047,' Projects Morgan Stanley

The Union Budget 2024 is expected to be a defining moment for India, blending fiscal discipline with visionary developmental goals. According to Morgan Stanley, Finance Minister Nirmala Sitharaman's presentation on July 23 will mark the first major policy statement of the Modi 3.0 administration.

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Emphasis on Fiscal Discipline

Morgan Stanley anticipates that fiscal prudence will continue to steer the overall fiscal policy stance. The government is expected to retain the fiscal deficit target at 5.1% of GDP for FY25, in line with the interim budget. This target sets the stage for achieving a fiscal deficit of 4.5% by FY26. In comparison, the fiscal deficit in FY24 was 5.6% of GDP.

Boost in Fiscal Headroom

A notable transfer of surplus from the Reserve Bank of India (RBI) has improved fiscal headroom, according to Morgan Stanley. This unexpected boost will support continued momentum in capital expenditure (capex) and targeted welfare spending. There is even potential for a slightly reduced fiscal deficit target, potentially below 5.1%, bolstered by strong tax and non-tax revenues.

Medium-Term Fiscal Strategy

The budget may also outline a medium-term fiscal consolidation plan extending beyond FY26. This strategy is essential for ensuring long-term fiscal stability and sustainability, aligning with broader economic goals.

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Investment in 'Viksit Bharat 2047'

A significant aspect of the budget will be the focus on 'Viksit Bharat 2047,' the government's vision of transforming India into a developed nation by its 100th year of independence. This vision encompasses massive investments in infrastructure, technology, and human capital, setting a roadmap for sustainable and inclusive growth.

Market Implications

Morgan Stanley points out that the Union Budget's impact on the Indian stock market has historically diminished, with actual market performance often dictated by pre-budget expectations. As the budget approaches, the market exhibits optimism, but investors should prepare for potential volatility and corrections post-budget.

Conclusion

The Union Budget 2024 is poised to balance fiscal responsibility with ambitious developmental initiatives. With a strategic focus on capex and targeted social sector spending, the government aims to lay a strong foundation for infrastructure development while advancing towards fiscal consolidation. The vision of 'Viksit Bharat 2047' will likely be a central theme, guiding India's journey towards becoming a developed nation.

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