Budget 2024 may focus on jobs, Viksit Bharat, 5.1% deficit: Morgan Stanley

The US-based multinational investment bank Morgan Stanley has released a report outlining its predictions on India’s upcoming Union Budget, scheduled to be presented by Finance Minister Nirmala Sitharaman on July 23. Broadly, the report expects the government’s focus to continue on jobs, capital expenditure (capex), social spending, and Prime Minister Narendra Modi’s Viksit Bharat vision. Modi 3.0 is likely to maintain fiscal deficit at 5.1 per cent of GDP for the fiscal year 2024-’25 (FY25), the report adds.

The report’s forecast that fiscal deficit will be retained at a rate of 5.1 per cent for FY25 suggests that the government will carry on with its effort to balance revenue and expenditure, in order to stay on the track of economic recovery. The fiscal deficit target that the government seeks to attain in FY26 is 4.5 per cent.

Jobs, social spending and capital expenditure (capex) can be expected to be focus areas in Budget 2024, the report said, in sync with the Centre’s plan to increase scope of employment, augment social welfare programs and ensure investments in infrastructure and development projects witness growth.

“With fiscal prudence guiding the overall fiscal policy stance, we expect the focus to remain on capex expenditure over revenue expenditure and targeted social sector spending with focus on improving access to physical, social and digital infrastructure,” the Morgan Stanley report says.

The report also discusses the Prime Minister’s Viksit Bharat vision, aimed at transforming India into a developed nation by 2047.

“We also expect the budget to provide focus on the government’s road-map for ‘Viksit Bharat’ (developed nation) by 2047. In addition, the budget could also give a road-map for a medium-term plan for fiscal consolidation beyond FY26,” the report says.

The Morgan Stanley report also talks of possible market volatility that could follow budgetary announcements and how these could affect the markets. Investors could be influenced by fiscal policy changes, as well as new measures in spending allocation and taxation, the report noted and warned of post-Budget market fluctuations.

“We think the market could be surprised by the lack of major tax cuts or redistribution spends,” the report stated.