India’s Budget Plan To Sustain Demand For Corporates, Fitch Says

Fitch Ratings said the higher spending, tax cuts and supportive policies announced in India’s federal budget will support sustained demand growth and improve the longer-term prospects for a number of corporate sectors.

The tax cuts will boost consumer sentiment and maintain consumption growth amid expectations of slower economic growth after the financial year ending 31 March 2023, Fitch said in a statement.

A larger budget allocated to infrastructure and the government's good execution record over the last few years bodes well for sectors such as cement, steel and construction, it added.

The rating agency said the budget proposes to increase planned capital expenditure by 33% to 10 trillion rupees ($122 billion) in FY24, with a focus on augmenting core infrastructure assets, including roads, railways, airports and logistics. The planned capex is more than double the spending in FY21 and more than thrice that in FY19, underscoring the government’s focus on boosting the country’s infrastructure, it noted.

Fitch said the announced income tax cuts are broad-based, and will benefit the disposable incomes of consumers of all income groups. This, and the largely neutral proposals for indirect taxes, should support consumer sentiment and demand growth for discretionary consumer products, it added.

The rating agency noted that the enhanced focus on and budget allocations to energy transition, as India moves towards it net-zero target by 2070, will benefit the renewable energy sector.

(Note: $1 = 81.9323 Indian rupees)