Budget Day’s Tomorrow And Here’s What You Need To Know

Too embarrassed to ask questions on the budget or curious like Geet from Jab We Met? Then, you must, must watch ‘When Budget Meets Bollywood’ before reading this newsletter!  

Well, now that we’ve answered your questions, let’s start with the economic survey…

Just like Netflix gives a recap before every new season of a show, the economic survey gives a recap of the economic affairs of a country a day prior to the Union Budget. 

Hit ‘skip’ on this year’s economic survey? Here’s a TLDR👇

⭐ Apna Time Aa Gaya

Remember how Virat Kohli started firing on all cylinders in 2022’s T20 World Cup after a long dry spell? Well that’s where India is right now, as per our Chief Economic Advisor (CEA) V Anantha Nageswaran. The CEA declared that India’s ‘post-pandemic recovery is complete’. India’s economy, he asserted, is poised to do better in this decade. This will be supported by robust loan demand from industry and a revival in capex by private companies. 

⭐ ‘Well-behaved’ inflation

Good news on the inflation front as well. The ‘Mehengaai Daayan’ is slowly losing her grip over the economy. The CEA said Inflation will be ‘well-behaved’ in FY24. So, while retail prices are estimated to rise by 6.8% in the current financial year, we can hope for some relief on the price front in the new fiscal. 

⭐ More jobs for the taking?

Happy days could be here for job seekers. According to the CEA, the unemployment rate has dropped to 4.2% in FY21 from 5.9% in FY19. With private sector investment kicking in and the construction sector coming back to life, the job market could see a pick-up. 

⭐ Govt has been ‘samajhdaar’ with money

Time now to discuss India’s ‘fiscal deficit’. The CEA said the Indian government is on track to meet its fiscal deficit target of 6.4% of the GDP. This is despite the additional spending on food and fertiliser due to global supply disruptions. 

⭐  Make-In-India gets competitive

Did you know iPhones are now ‘Made-in-India’? That’s because of the Production linked incentive or PLI scheme that found special mention in the Economic Survey. Conceived as a post-pandemic plan to unlock manufacturing capacity, boost exports and reduce import dependence, the plan has seen ₹47,500 crore of actual investment made across 14 different sectors. Why is it different? Like you and me, companies get this incentive only if they meet their production ‘targets’.

In Focus

5 Ways the Budget Impacts The Stock Market Or Why You Should Care!

Every year investors closely follow the finance minister's (FM) speech on budget day. From subsidies to taxes, let’s look at 5 ways the budget can impact the markets

1. Key Allocations (where the money goes could be a good place to park your money)

Often, the government spends money to boost economic growth by setting it aside for various sectors such as Defence, Infrastructure and Railways. Higher spending can have a positive impact on the market as it boosts consumption and leads to job creation. Fund allocation for any sector is considered good news as it can translate into new business for companies. 

2. Subsidies (special privilege)

Got the Lollapalooza pass at a discount and screamed with joy? Consider subsidies, the special privilege that certain sectors get from the government. For instance, if the government provides subsidies for food and fertilisers this is beneficial for the fertiliser companies and agriculture sector.

3.Taxes (that part of the budget that we all wait for)

The third factor which can have an impact on the markets is taxes. When the government makes a change in direct taxes like Income Tax or indirect taxes like customs duties, it directly affects the demand. 

Increasing taxes boosts the government revenue but it also reduces money in people’s hands which means a possible slowdown in consumption. This can, in turn, hurt the earnings of listed companies. 

Any change in the Securities Transaction Tax or the Capital Gains Tax levied on trading in the markets can also impact market sentiment.

A reduction or increase in duties impacts the final price of the goods produced and is hence, significant for business. 

Therefore, traders track tax announcements very closely.

4. Government targets (can work as your North Star)

The government sets growth targets for various parameters like fiscal deficit and GDP in the Union Budget. For the stock market, this functions as an indicator of things to come. For instance, a higher GDP growth target means the government expects higher output that year. Companies take this as a positive indicator because it reflects confidence in the economy and business.

5. Govt’s divestment plan (so you can make your investment plan)

Investors keenly monitor the disinvestment list of the government. These are companies in which the government wants to sell or reduce its stake. Last year, the focus was on the listing of the state-owned life-insurer LIC. Similarly, this year the focus may be on the divestment path for listed companies like BPCL and IDBI Bank.

Geared-up for tomorrow? Stay tuned on our Social Media channels as we discuss the Union Budget and unpack it for you!

Happy Budget Day, 

Team Upstox