Budget 2024: Falling Cost Of Capital To Kick In Some Animal Spirits, Says Shankar Aaiyar

The falling cost of capital through reduced government borrowing may kick in some animal spirits in the system, political economy analyst Shankar Aaiyar said on Thursday.

The key issue of growth in private capital expenditure has been addressed. So, the bet is on private capex and the Union government reduces its footprint in the borrowing market, he told NDTV Profit.

The falling cost capital may kick in some animal spirits in the system and much of this will reflect in their presentations for improving their sovereign rating with credit rating agencies, according to Aaiyar.

Finance Minister Nirmala Sitharaman presented the interim budget 2024, in which infrastructure spending and ease of doing business remain among the key focus areas.

Aaiyar said private capex is also haunted by the sectoral definition of budget document and the level of capex is a credible figure, because there is only so much that can be executed. He underscored that there is a latent desire in the private sector to invest.

Reducing government footprint in the borrowing market has created a little room for private sector, Aaiyar said. "That little room also has to be supplanted by rise in deposit."

The budget can't be called a populist one because it is conservative in its approach of fiscal deficit and borrowing numbers, he said. "I think what is happening is the government is betting on private consumption."