Union Budget 2023-24 Preview - Capex Focus To Stay But Rural Thrust Also Likely: Nirmal Bang

Ahead of Lok Sabha elections in CY24 and given the recent rural distress, we expect higher allocation to rural schemes.

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Nirmal Bang Report

We expect fiscal consolidation to be gradual and are building in a fiscal deficit of 6.2% of gross domestic product in FY24 versus 6.4% of GDP in FY23.

While we do not entirely rule out the government factoring in a slightly lower fiscal deficit of 5.9- 6% of GDP for FY24, we believe that under-estimation of revenue expenditure or aggressive revenue estimates may not be palatable for markets.

However, we also note that in recent years, the government has erred on the side of caution with its revenue estimates. We are factoring in tax revenue growth of 11.5% for FY24, just a tad higher than our nominal GDP growth of 10.5%.

We expect the focus on government capex to stay and factor in 15% growth in FY24. We believe that railways and roads will be the largest beneficiaries of incremental government capex. Overall, we factor in revenue expenditure growth of ~7.5% in FY24 over the revised estimates for FY23.

Ahead of Lok Sabha elections in CY24 and given the recent rural distress, we expect higher allocation to rural schemes with focus on rural infrastructure development.

This will partially offset lower fertiliser subsidies and some moderation in food subsidies.

We expect higher payouts under various government schemes to ease the burden of inflation for the ‘Bottom of the Pyramid’ strata. This may include higher payouts under the PM Kisan Yojana announced in the budget or during the course of FY24.

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Nirmal Bang Union Budget Preview 2023-India Economy.pdf

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