FM to focus on sustaining economic growth; demand-boosting steps likely: IDBI Bank's Suresh Khatanhar

In the midst of global turmoil and uncertainty, the budget is expected to focus on strengthening domestic factors to fortify the country’s economy and spur growth.

Suresh Khatanhar

The budget to be presented on February 1 is likely to focus on maintaining the momentum of economic recovery amid global challenges to achieve the target of a $5 trillion GDP in the next couple of years.

Building upon earlier budgets, there will be measures aimed at strengthening domestic manufacturing, furthering rural development, developing infrastructure including social infrastructure, and attracting foreign investment.

Also Read | Budget Session to begin on January 31, FM Nirmala Sitharaman to present Interim Budget on Feb 1

Considering the critical role played by banks, the budget may focus on further streamlining Insolvency and Bankruptcy Code norms and re-examining the structures of the National Asset Reconstruction Company and the India Debt Resolution Company to facilitate seamless credit flows in the economy.

Announcements in the interim budget are likely to centre on sustaining India’s position as one of the fastest-growing major economies and propelling it to become a $5 trillion economy with the third-largest GDP in 2027-28.

Do Not Miss | Budget 2024: All you need to know about cut motion

Amid global turmoil and uncertainty, the budget is expected to focus on strengthening domestic factors to fortify the country’s economy and spur growth.

Incentives, manufacturing

To safeguard itself from the global turmoil and drive medium-term growth, there may be accelerated efforts towards the development of new and emerging sectors. In addition to programmes such as production-linked incentives, there will be a focus on increased allocation of funds for upscaling and vocational training in identified sectors to boost manufacturing growth to the next phase.

Continued efforts to simplify policies and regulations to enhance the ease of doing business would help in creating a conducive environment, thereby safeguarding the domestic economy from external shocks.

To encourage manufacturing, the budget is expected to focus on boosting exports to diversified and new markets and stimulate domestic demand.

Also Read | Budget 2024: Real estate sector pitches for industry status and lower interest rates

Infrastructure capital expenditure, which is presently focused on roads and railways, is likely to be widened to developing ports and shipping, energy, and urban infrastructure. Incentives to attract foreign investment and tax benefits may be announced.

Tax measures are expected to boost savings and disposable income, which could have a multiplier effect on domestic demand.

Given the emphasis on a sustainable future, there may be announcements related to sustainable finance, especially through MSME (micro, small and medium enterprises) financing, which has been at the centre of the government’s agenda. Digital banking and enhanced access to financial services, especially through digital channels, are expected to feature prominently.

There may be announcements regarding the fintech sector, which has emerged as an important stakeholder, to provide them with suitable incentives to boost their role and complement traditional players in the space.

Through the budget, the government is expected to signal its intent to continue on the path of pragmatic fiscal management, with emphasis on higher capital expenditure supported by buoyancy in tax revenues.

By and large, it is expected that the government will be able to achieve its fiscal deficit target of 5.9 percent of GDP for FY24 and will be on course to announce a more restrictive fiscal deficit target for next year.

(The author is Deputy Managing Director of IDBI Bank. Views are personal)