Interim Union Budget 2024: Mutual Funds Investing in these Sectors May Benefit from Ms Sitharaman’s Proposals
February 2, 2024 Mutual Fund
Finance Minister, Ms Nirmala Sitharaman presented the Interim Budget for 2024 today, on February 01, 2024. This was a vote on account ahead of the Lok Sabha elections to be held possibly in April and May 2024. So, effectively it’s temporary, and the full-fledged budget will be presented only in July 2024, by the government that comes to power.
During the hour-long speech, Ms Sitharaman presented a detailed economic roadmap on how the government plans to transform India’s capability to empower all-round, all-pervasive, and all-inclusive growth.
Keeping in mind the aim to make India ‘Viksit Bharat’ by 2047, Ms Sitharaman introduced a ‘development-focused budget’ by prioritising the needs, aspirations, and welfare of the ‘Poor’, ‘Women’, ‘Youth’, and ‘Farmers’. Ms Sitharaman is of the view that the empowerment and well-being of these four segments are crucial for the country’s progress.
Notably, contrary to the popular consensus or expectations, the Finance Minister kept the personal income tax rates and slabs unchanged. As such, there was no direct tax relief for the taxpayers.
However, the government did announce some measures that may benefit certain key sectors of the economy, and thereby boost GDP growth. This, in turn, can boost employment opportunities and improve household savings.
The development of the economy is positive for the stock markets. As a result, Mutual Funds, especially those having a substantial allocation to sectors within the focus area of the government, are also likely to benefit and may enhance returns for their investors.
So read on to know the key sector-oriented measures announced by the government in the interim budget 2024:
1) Infrastructure
The government’s capital expenditure outlay has tripled in the past 4 years, resulting in a huge multiplier impact on economic growth and employment creation. It now aims to further increase the outlay for the next year by 11.1% to Rs 11.1 lakh crore. This would account for 3.4% of the GDP.
Some of the key infrastructure projects that the government will take up are as follows:
a) The government recently announced the India-Middle East-Europe corridor that aims to create a comprehensive transportation network, comprising rail, road, and sea routes, connecting India, the Middle East, and Europe. The project can potentially enhance transportation efficiency, reduce costs, increase economic unity, generate employment, and lower greenhouse gas emissions.
b) The government is close to achieving the target of three crore houses under the PM Awas Yojana. It will take up two crore more houses under the scheme to meet the requirement arising from the increase in the number of families. The allocation in the scheme has been hiked to Rs 80,671 crore, a 49% hike.
c) The government will also launch a scheme to help deserving sections of the middle class living in rented houses, slums, chawls, and unauthorized colonies to buy or build their own houses. This is expected to give a boost to infrastructure development – and benefit sectors such as cement, steel, real estate and engineering.
Additionally, the government will implement three major economic railway corridor programmes, which will include:
i) Energy, mineral and cement corridors,
ii) Port connectivity corridors, and
iii) High traffic density corridors.
The projects have been identified under the PM Gati Shakti for enabling multi-modal connectivity. They are expected to improve logistics efficiency and reduce costs.
It will also undertake expansion of Metro rail and NaMo Bharat network in large cities to meet the demand of the rapid urbanisation taking place.
Besides the government will undertake the expansion of existing airports and will develop new airports expeditiously under the UDAN scheme.
[Read: 5 Equity Mutual Funds with Higher Exposure to Infrastructure Stocks]
2) Healthcare
Taking cognisance of the ambition of several youths to get qualified as doctors, aiming to serve people through improved healthcare services, the government plans to set up more medical colleges by utilizing the existing hospital infrastructure under various departments.
In yet another positive move towards improving health, the government will encourage vaccination for girls in the age group of 9 to 14 years for the prevention of cervical cancer. This social cause is expected to benefit the pharma and healthcare sector in return
[Read: The Future for Pharma & Healthcare Looks Bright: Here Are 6 Mutual Funds to Invest in]
The government will also bring various schemes available for maternal and child care under one comprehensive programme for synergy in implementation. Moreover, it will expedite the upgradation of Anganwadi centres under ‘Saksham Anganwadi and Poshan 2.0’ for improved nutrition delivery, early childhood care and development.
The government will expeditiously roll out the newly designed U-WIN platform for managing immunization and intensifying efforts of Mission Indradhanush throughout the country.
Besides, the government will extend Healthcare coverage under the Ayushman Bharat scheme to all ASHA workers, Anganwadi Workers, and Helpers. The allocation to Ayushman Bharat (PMJAY) scheme has been hiked by 4.2% to Rs 7,500 crore for FY 2024-25.
(Source: indiabudget.gov.in)
3) Agriculture
Recognising the farmers are our ‘Annadata’, the government will step up efforts for value addition in the agricultural sector and boost farmers’ income through various schemes such as PM-Kisan Samman Yojana, PM Fasal Bima Yojana, PM Kisan Sampada Yojana, etc.
The government also aims to formulate a strategy to achieve ‘Atmanirbharta’ for oil seeds such as mustard, groundnut, sesame, soybean, and sunflower. This will cover research for high-yielding varieties, widespread adoption of modern farming techniques, market linkages, procurement, value addition, and crop insurance.
To ensure faster growth of the agriculture sector, the government will further promote private and public investment in post-harvest activities including aggregation, modern storage, efficient supply chains, primary and secondary processing and marketing and branding.
In terms of fertiliser, after the successful adoption of Nano Urea, the application of Nano DAP on various crops will be expanded to combat climate change.
A comprehensive programme will also be formulated to support dairy farmers. Efforts are already on to control foot and mouth disease. India is the world’s largest milk producer but with low productivity of milch-animals. The programme will be built on the success of existing schemes such Rashtriya Gokul Mission, National Livestock Mission, and Infrastructure Development Funds for dairy processing and animal husbandry.
The Modi-led-NDA government was the first to set up a separate department for Fisheries realising the importance of assisting fishermen. According to the Budget speech, this has resulted in the doubling of both inland and aquaculture production. Seafood exports since 2013-14 have also doubled. It will now step up the implementation of Pradhan Mantri Matsya Sampada Yojana (PMMSY) to:
a) Enhance aquaculture productivity from existing 3 to 5 tons per hectare,
b) Double exports to Rs 1 lakh crore and
c) Generate 55 lakh employment opportunities in the near future.
Five integrated aquaparks are expected to be set up by the government.
4) Green Energy
With the goal of moving towards meeting the commitment for ‘net-zero’ by 2070, the government will undertake the following measures.
✓ Viability gap funding will be provided for harnessing offshore wind energy potential for an initial capacity of one giga-watt.
✓ The coal gasification and liquefaction capacity of 100 MT will be set up by 2030. This will also help in reducing imports of natural gas, methanol, and ammonia.
✓ Phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes will be mandated.
✓ Financial assistance will be provided for the procurement of biomass aggregation machinery to support collection.
Furthermore, the government plans to expand and strengthen the e-vehicle ecosystem by supporting manufacturing and charging infrastructure. It will also encourage greater adoption of e-buses for public transport networks through payment security mechanisms.
To promote green growth, a new scheme of bio-manufacturing and bio-foundry will be launched. This will provide environment-friendly alternatives such as biodegradable polymers, bio-plastics, bio-pharmaceuticals and bio-agri-inputs. The government expects this scheme to help in transforming today’s consumptive manufacturing paradigm to one based on regenerative principles.
Additionally, for promoting climate-resilient activities for blue economy 2.0, a scheme for restoration and adaptation measures, and coastal aquaculture and mariculture with integrated and multi-sectoral approach will be launched.
It is noteworthy, the government has hike the allocation to Solar Power (Grid) to Rs 8,500 crore, a 71% hike, National Green Hydrogen Mission to Rs 600 crore, a 102% increase, and Blue Revolution to Rs 2,352 crore, a 57% hike. It has also hiked allocation to Wind Power (Grid) and Green Energy Corridor.
[Read: Best Mutual Funds to Invest in Renewable Energy in India]
[Read: Top 5 Mutual Funds with High Exposure to EV Revolution]
5) Technology
The adoption of new-age technologies has been at the forefront of the Modi government’s policies. Notably, India has gained strength globally as an innovation and technology hub.
The government believes that for our tech-savvy youth, this will be a golden era. Consequently, the government has proposed the establishment of a corpus worth rupees 1 lakh crore with a 50-year interest-free loan, which will provide long-term financing or refinancing to scale up research and innovation significantly in sunrise domains.
It will also launch a new scheme for strengthening deep-tech technologies for defence purposes and expediting ‘Atmanirbharta’.
[Read: 5 Equity Mutual Funds to Benefit from India’s IT and Tech Boom]
6) Tourism
Buoyed by the success of organising G20 meetings in India and with a growing number of people aspiring to travel and explore, India has the potential to become an attractive destination for business and conference tourism. It is noteworthy that tourism, including spiritual tourism, has tremendous opportunities for local entrepreneurship.
As a result, the government will encourage states to take up comprehensive development of iconic tourist centres, branding and marketing them on a global scale. It will establish a framework for rating the centres based on the quality of facilities and services. Further, it will provide long-term interest-free loans to States for financing such development on a matching basis.
Moreover, to address the emerging fervour for domestic tourism, projects for port connectivity, tourism infrastructure, and amenities will be taken up on Indian islands, including Lakshadweep. This will also help in generating employment opportunities.
[Read: Diversify Your Portfolio with Hospitality & Tourism Stocks: Top 5 Mutual Funds]
Apart from introducing sector-specific reforms, the government is also determined to walk tight on the path of fiscal consolidation. The fiscal deficit for 2023-24 is expected to be 5.8% of the GDP. It is expected to decline to 5.1% of the GDP in FY 2024-25 and 4.5% by FY 2025-26. This is overall positive for the overall health of the economy, as it means financial prudence as India walks the high growth path.
As mentioned earlier, the government has pegged the allocation to the infrastructure sector at Rs 11.1 lakh crore, up by 11.1% compared to the previous fiscal year. The higher capex outlay, particularly for infrastructure boost, proposed by the government could also result in higher credit demand for banks, especially PSU Banks, over the next few years.
Besides, the government also expects the GIFT IFSC and the unified regulatory authority, IFSCA to create a robust gateway for global capital and financial services for the economy.
To conclude:
With these measures, the Mod-led-NDA continues to lay focus on various reforms, which are next-generational and expected to keep India from becoming a global superpower in years to come.
That said, while public expenditure has witnessed an uptick over the last few years, private sector investment has been lacklustre due to global uncertainties and a high interest rate environment. To maintain the country’s growth momentum, the private sector investments revive and consumption-driven growth continues.
[Read: Key Investment Risks to Watch Out for in 2024]
The silver lining is that the corporate sector’s balance sheet has remained robust and is well-positioned to increase its investments in the future.
The government’s growth measures and expected revival in the private capex cycle can potentially work in favour of mutual funds over the long run.
This article first appeared on PersonalFN here
