What Investors should be looking out for in the Interim Union Budget ‘24
Current Trends that can affect Budget Outcomes
Direct tax collection is up close to 20% while indirect tax collection is gradually increasing. Mutual fund AUM jumpted 10 lakh crore in 1 year, it took 40 years to get to 40 lakh crore.
It’s hard to foresee what can derail this steam roller of a rally as increased formalization is leading to demand being created in the formal economy.
Where could the Interim Budget focus?
- The GDP is also expected to be above 6%. In this backdrop, we expect more outlays in the education, defense and infrastructure sectors.
- It’s imperative that the government taxes the people with higher income – that cannot be reversed. But if you are not a beneficiary of tax exemptions, the only way to win is to invest in growth assets that depend on consumption from people who have tax benefits. This could mean things like metals, cement, building materials for all the people who will need formal housing to things like clothing, automobiles, entertainment networks, insurance, telecom etc. This means that instead of complaining about taxes not working for you, it’s better to collect profits made by corporations who sell to people who pay little or no taxes.
This is surprisingly easy to do by being a long term investor. In our minds, long term means over 10 years but atleast 5 years.
- Indian corporates that are listed are mostly exporters of services and goods. Indian rupee depreciated from the 60s to the 80s. This means, margins have expanded supporting higher cost bases. This creates inflation. However, given MSCI changes on weights of Indian equity and inclusion of Indian local currency government bonds in global bond indices of JP Morgan is expected to create a technical demand for INR. This can cause INR to appreciate form current levels hurting exporters but at the same time lowering inflation as stronger rupee will be used to import oil. This gives more leg room to RBI to reconsider its neutral stance to be accommodative. If that were to happen we can expect an opposing force supporting higher PE multiples.
- The budget can incentivise tax relaxations in GIFT city for exporters which can be used to weather an appreciating rupee. Moreover, there can be certain changes to the fiscal side in terms of duties and levies on import which can protect Indian businesses.
- There is a growing problem in terms of unsecured credit given as credit card debt, peer-to-peer and priority lending. RBI has been observed expressing concerns here by limiting credit velocity using higher cost of capital. If the problem is deeper and bigger, this can again cause formal credit to be withdrawn from the market of unsecured lending – and cause demand destruction in rural economies. If there are certain tax incentives or credit guarantees available in the budget to help this sector, it would be viewed positively.
Understanding the Interim Union Budget ’24 with Lotusdew Wealth
Get ready for an in-depth analysis of the Interim Union Budget ’24!
In this live webinar, we break down the key elements and unveil the intricacies of the economic roadmap presented in the interim budget. From fiscal policies to sectoral allocations, we’ve got you covered.
Join us as we navigate through the financial corridors of the Interim Union Budget ’24, deciphering the numbers and implications that matter. Whether you’re a policy enthusiast, business owner, or just curious about the economic outlook, this video provides a detailed understanding of the budget’s nuances.
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