Global brokerage firm Morgan Stanley anticipates that Finance Minister Nirmala Sitharaman’s forthcoming Budget will articulate a clear path towards ‘Viksit Bharat’ by 2047, alongside outlining a medium-term strategy for fiscal consolidation.
In a research report released on Wednesday, Morgan Stanley highlighted that fiscal prudence will guide the government’s fiscal policy stance. The firm expects the Budget to prioritize capital expenditure (capex) over revenue expenditure, emphasizing targeted social sector spending aimed at enhancing access to physical, social, and digital infrastructure.
Scheduled for presentation on July 23, Sitharaman’s Budget for fiscal 2024-25 is poised to be the first major policy document under the new government, setting the tone for economic priorities and strategies ahead.
The brokerage firm projects that the central government will maintain the fiscal deficit target at 5.1 per cent of GDP for 2024-25, aligned with the interim budget. This target reflects a reduction from 5.6 per cent of GDP recorded in the previous fiscal year, with a further aim to achieve 4.5 per cent of GDP by the subsequent financial year.
Morgan Stanley noted that improved fiscal headroom, bolstered by a higher-than-expected surplus transfer from the Reserve Bank of India (RBI), is likely to sustain momentum in capex spending and augment targeted welfare expenditures. This, in their assessment, could potentially lead to a marginally lower fiscal deficit target, slightly below 5.1 per cent of GDP, supported by robust tax and non-tax revenues.
Furthermore, the report underscored expectations that the Budget will outline the government’s vision for ‘Viksit Bharat’ – an initiative aimed at transforming India into a developed nation by 2047. Additionally, it anticipates a medium-term plan for fiscal consolidation extending beyond 2025-26.
Regarding market expectations, Morgan Stanley acknowledged a historical trend of pre-Budget market exuberance followed by potential volatility and corrections post-Budget. They cautioned that while market sentiment currently appears optimistic leading into the Budget, actual market performance will hinge on alignment with these expectations.
As stakeholders await Sitharaman’s Budget address later this month, analysts and investors alike are poised to gauge its impact on sectors and market dynamics amid evolving economic conditions
