The Indian equity markets are on a roll, driven by a liquidity rally that has no parallel in this country. Some experts are of the opinion that the Union budget for FY25 might bring down the indices to more sober levels.
Since the Sensex 30 has already scaled 80,000, the stakes of a large number of investors are rising. Therefore, the budget – the single most significant economic event of the year – would be keenly watched.
Here are the things that experts could be looking out for when Finance Minister Nirmala Sitharaman rises to present the budget.
Fiscal prudence
Foremost, overall fiscal prudence. Big borrowing by the government tends to stoke inflation, which adversely impacts the common man.
The big dividend payout of Rs 2.11 lakh crore by the Reserve Bank of India might be of use in this regard. It could mean the government has to borrow less for the rest of the year.
If the government borrows less, it will allow space for the private sector, which could indicate a slightly lower cost of capital for businesses and upward pressure on margins.
Boosting consumption
Another macro impact that the budget will be expected to deliver is boosting consumption. This is extremely important since the factors leading to increased consumption and those resulting from it will be significant for the economy. For example, consumption will rise if income levels rise. And once consumption rises, it would signify increased revenues for different categories of companies.
Support for the rural economy will be an important aspect that is also needed to boost consumption across a whole array of goods from FMCG goods to consumer durables to two-wheelers and tractors.
If aggregate consumption rises in the economy, if the rural sector gets relief and if the government borrows less, it would certainly help the stock markets.
Budget expectation: Employment and tax gains
If businesses experience a rise in consumption, it could prompt some of them to set up new manufacturing capacities, which, in turn, can generate employment. Additional employment, again creates additional consumption in the economy.
With buoyancy in the collection of direct taxes, if Finance Minister Nirmala Sitharaman can ease the burden of Income Tax on the common man, it would also lead to increased consumption.
The market would also look for such signals eagerly.
After the coalition government was formed after 10 years of unquestioned sway by BJP, there were apprehensions of populist policies. But after Prime Minister Narendra Modi assured of the continuation of earlier policies and the reformist agenda of the government, the market also regained verve and enthusiasm.
Populist or reformist, in short that was the question in the market till recently. But despite leading a coalition government for the first time, Prime Minister Narendra Modi has signalled willingness to continue on the path of reform. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
