Sell-Side Views Post The Budget

J.P. Morgan: "India’s 2023-24 (FY24) budget was in line with what we had anticipated on the key dimensions: the quantum of consolidation, where the fiscal space would come from and what the expenditure priorities would be. The Budget re-affirmed that the FY23 deficit would stick to the budgeted target of 6.4% of GDP and pegs the FY24 deficit at 5.9% of GDP -- a consolidation of 0.5% of GDP, in line with what we had expected. With total public sector borrowing requirements (PSBR) still above 9% of GDP, some consolidation was imperative. Yet, with activity still about 7% below the pre-pandemic path and growth expected to slow next year, it was equally important not to over-consolidate. Against this backdrop, 0.5% of GDP consolidation next fiscal appears par for the course."

Goldman Sachs: "The central government presented a budget that ticks all the essential macro-prudential boxes. Firstly, it held to the path of fiscal consolidation by targeting a 50bp GDP reduction in the fiscal deficit for FY24,[1] with what we consider largely realistic tax buoyancy assumptions. Secondly, it proposed to improve the quality of spending by increasing capital expenditures by 70bp. And finally, it budgeted for a reduction in net market borrowing by 30bp, causing a rally in government bonds."

ANZ: "A record high allocation to capital expenditure (capex) is the main highlight of the FY24 budget, underscoring the government’s strong commitment to infrastructure development.

Enhanced capex will have a high multiplier-effect on growth and crowd-in effect on private investment. However, the combined changes in tax rates and expenditure profile do not signal much of an impulse to household consumption. The fiscal arithmetic for FY24 looks mildly challenging as tax revenue projections appear more buoyant than the state of business cycle would warrant. Yet, any slippage in the fiscal targets is unlikely to be material."

Barclays: "Faced with the conflicting aims of supporting growth while maintaining macro stability, Finance Minister Nirmala Sitharaman stuck to the script, allowing for modest consolidation of the deficit, while keeping productive capital-spending growth elevated. Finance Minister Nirmala Sitharaman presented the budget for FY23-24, which in our view sets realistic revenue targets and prioritizes expenditure prior to an election year, and proposes modest fiscal consolidation, along expected lines. The FY22-23 fiscal deficit was broadly retained at 6.4% of GDP, with the FY23-24 deficit pegged at 5.9% of GDP, broadly in line with market forecasts. The government maintained its intention to meet the medium-term fiscal-deficit consolidation glide path, and expressed confidence about reducing the fiscal deficit to 4.5% of GDP by FY25-26."