Budget 2024: Corporate India To Push Pedal On Private Capex, Says Rajiv Anand

With the fiscal deficit target of 5.1% for FY25, corporate India will push the pedal on private capex as we go forward, according to Rajiv Anand.

The budget clearly shows that the fiscal deficit is going to be managed in the next five years, said Anand, deputy managing director of Axis Bank Ltd. With the market expecting a fiscal deficit of 5.4%, the announced target is a "pleasant surprise", he said.

Finance Minister Nirmala Sitharaman presented the interim budget 2024 on Thursday. Infrastructure spending and ease of doing business remain among the key focus areas.

The FY24 fiscal deficit is estimated at 5.8% of GDP, below the budgeted 5.9%, the Finance Minister said. She pegged the FY25 target at 5.1%, with an aim to reduce it to 4.5% by FY26.

Fiscal arithmetic looks credible as the capital expenditure increase is higher than the overall rise in expenses, which is positive. "We are certainly seeing private capex kicking in the last 8–12 quarters."

Since corporate accruals have been strong, much of this private capex has been funded by accruals. "After we get the uncertainty of the elections out of the way, we can expect that corporate India will push the pedal on private capex as we go forward."

Markets will be comfortable working with the gross borrowing numbers for FY25, according to Anand.

Liquidity in the system is quite tight and as a result, we have already seen the cost of funds for banks have gone up, he said. "Once the first rate cut in the U.S. happens and with index inclusion, we will see some easing of liquidity."

"We will have to see some monetary action, whether it is many more variable rate reverse repo, open market operations, or even a cash reserve ratio cut at some point, it's time for this liquidity to ease," he said.