As the nation eagerly awaits the unveiling of the Union Budget, a pre-budget analysis is a crucial exercise to understand the potential directions and priorities the government might take. As part of this exploration, we delve into the key sectors that are likely to be in the spotlight during the budgetary announcements. From Social Welfare to Defence, each sector plays a crucial role in shaping the economic landscape of the country.
The budget allocations to respective sectors have been known to cause market swings that can serve as an opportunity to book profits, buy on dips, or invest with various goal-horizons. As an investor, it is vital for you to preempt these movements to take advantage of them and enhance your personal portfolio. Here are some of the key sectors that the experts feel will be in focus in the upcoming budget.
Table of Content
Social Welfare, Education, and Healthcare
Social Welfare, Education, and Healthcare sectors play a pivotal role in the Union Budget. Allocations in this sector reflect the government’s commitment to the welfare of its citizens. There have been a vast array of initiatives, from poverty alleviation programs to healthcare and education schemes. Notable schemes like the Mahatma Gandhi National Rural Employment Guarantee Act, Pradhan Mantri Jan Dhan Yojana, Ayushman Bharat, and the Mid-Day Meal Scheme underline the government’s multifaceted approach. In the 2023 budget, increased funding was directed towards expanding healthcare access and strengthening social security programs. The same trend is expected to continue this year as well.
Agriculture
India is one of the world’s largest agrarian economies. Agriculture forms the backbone of the Indian economy, and budgetary announcements for this sector hold significant importance. Historically, budgets have addressed challenges faced by farmers, promoting irrigation, crop insurance, and overall agricultural growth. Initiatives such as the PM Kisan Samman Nidhi and the Agricultural Infrastructure Fund have been pivotal. The 2023 budget prioritised agricultural infrastructure, technology adoption, and irrigation, emphasising sustainable growth. We can expect to see more of the same in the upcoming budget including a continued boost to agro-startups and direct farmer-to-market intermediaries.
Infrastructure
The recent inauguration of Ram Mandir in Ayodhya has, in itself, given a massive impetus to the local infrastructure. As India gears up for a record number of religious tourists – some reports predict as high as 3 lakh per day – the government has approved an Ayodhya Master Plan 2031 of approx Rs. 85,000 Cr. In the 2023 budget, increased funds were earmarked for railway infrastructure, focusing on modernisation, safety, and network expansion. The market is already abuzz with a high budget anticipated amount to be allocated for the rail sector that has seen rail stocks like IRFC and RVNL rally in double digits recently. Apart from that, aviation, roads, construction, and other associated segments are also expecting good news in the budget.
Defence
Defence allocations are fundamental for ensuring national security and safeguarding strategic interests. Historical trends in budgetary allocations for Defence reflect the evolving geopolitical landscape. With a push for Make in India, indigenous companies like BEL, Mazagon Dock Shipbuilders, HAL, etc. have been in the news for all the right reasons. This fundamentally sound sector may receive tax sops or other benefits to encourage production for the national defence wings.
Other Notable Areas
Well, apart from the sectors that have traditionally benefited from budget allocations, there is also the matter of disinvestment. The government had declared a very ambitious disinvestment target of Rs 51,000 crore. Only 20% of it has been achieved until January 2024. It is expected that the new disinvestment target may be lesser than what was announced in the previous budget to keep it more realistic.
On the taxation front, both individuals and corporate taxpayers wish to have simplicity in the calculation and levying of capital gains taxes, especially for the Securities Transaction Tax (STT) component. Their argument is that STT should be removed since capital gains are being taxed in any case. Furthermore, they have been requesting for an enhancement in the limit from Rs. 1 Lakh to Rs. 3 Lakhs. This move is expected to provide relief to investors while also encouraging them to become more active participants.
Individual taxpayers, in particular, have not seen a change in exemption limits in the longest time. While the new tax regime was introduced with a slightly enhanced exemption, to avail of it you will need to forego all other popular forms of deductions that fall under Sec 80C – like insurance premiums, pension plans, equity-linked savings schemes, tax-saving FDs, etc. Cumulatively, Sec 80C provides a tax benefit of up to Rs. 1.5 Lakhs only. Since long, citizens have been requesting for an enhanced limit of up to Rs. 3.5 Lakhs (or more), in alignment with rising costs and growing inflation. The same holds true for Sec 80D under which fall health insurance related benefits.
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Wrapping It Up
It is worth noting that the upcoming budget will be an interim one due to the Lok Sabha elections that are to be held in a few months. Historically, interim budgets have stayed clear of any major announcements or policy changes. However, the markets have still shown volatility before, during, and after budget announcements. As a responsible investor, it is important for you to keep track of such news to evaluate the impact on the various sectors and the economy on the whole.
As we anticipate Budget 2024, exploring these key sectors provides valuable insights into the government’s priorities and vision for the nation’s holistic development. We will be with you to bring you all the relevant updates and their impact, right here.
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