INTERIM

BUDGET
2024-25
Simplified
 Health Check up of Indian Economy

Being the election year, interim budget presented was not preceded by Economic Survey
However, below are the key pointers mentioned in the ‘Economic Review Document’ released by
the DEA that sheds light on progress of Indian economy

Undivided focus on
Capital Investment
Strong Corporate
Balance Sheet
Financial sector in
good shape

Trends in Investment Rates

Healthy Household
Consumption

Economic War Chest

2
Source: DEA: Department of Economic Affairs. (https://dea.gov.in/sites/default/files/The%20Indian%20Economy%20-%20A%20Review_Jan%202024.pdf)
 Undivided Focus on Capital Investment

Consistent growth of Govt. capex has resulted in significant build up

of the infrastructure across the country

Capital Expenditure by Public Sector

(Centre + CPSEs) National Highways (Km) Electrified Rail Route (Km)
1,44,634
20 18.6 58,812
18 97,991
16 14.6
22,224
14 11.4 12.7
10.6 11.1 11.7
12
10 7.9
6.9 FY 15 FY 23 FY 15 FY 23
8
5.6
6
4 Cargo Traffic at major ports Number of Airports
2
784 148
0
581
FY 23 RE

FY 24 BE
FY 15

FY 16

FY 17

FY 18

FY 19

FY 20

FY 21

FY 22

74

Capital Expenditure Grant for capital asset creation

FY 15 FY 23 FY 15 FY 23
Resources of Public Enterprise Total Capex (Mn Tonnes)

Data Source: Press Information Bureau (https://pib.gov.in/), Department of Economic Affairs (https://dea.gov.in/) and Ministry of Ports, Shipping and Waterways-
Government of India (https://shipmin.gov.in/ ). FY: Financial Year, Mn: Million, Capex: Capital Expenditure, Km: Kilometers, CPSE: Central Public Sector Enterprises, RE: 3
Revised Estimates, BE: Budgeted Estimates
 Financial sector in good shape

Banking sector health continues to remain in good shape. Even as credit growth surges, Gross NPAs decline.
Key ratios of Public Sector Banks, too highlight the robustness of the banking system

Gross NPAs as % of Gross Advances (SCBs) Key Ratios of Public Sector Banks
12 11.2

10 9.3 Parameters 2013-14 2022-23

9.1
8.2
8 7.5 7.3
Net Interest Margin (NIM) (%) 2.45 2.72
5.8
6
4.3
3.8
4 Return on Assets (RoA) (%) 0.50 0.79
2.8 3.2 3.2
2.2
2
Return on Equity (RoE) (%) 8.48 12.35
0
Sep-23
FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

Source: Department of Economic Affairs (https://dea.gov.in/sites/default/files/The%20Indian%20Economy-A%20Review_Jan%202024.pdf), NPA –

4
Non Performing Asset, SCB – Scheduled Commercial Banks, FY – Financial Year. Data as of Sep 30, 2023
 Healthy Household Consumption

Resilient domestic demand coupled with lower household leverage may

result in private capex pick-up

Share of Private Final Consumption Household Debt to GDP

Expenditure in GDP (%) 120%
Korea
62 Hong Kong
100%
61 Thailand
Malaysia Taiwan
60 80%
China
59
Singapore
58 60%
57
40%
56
India
55 20% Indonesia
54
Philippines
53 0%
0 20000 40000 60000 80000 100000 120000 140000
2015

2024
2011

2012

2013

2014

2016

2017

2018

2019

2020

2021

2022

2023

GDP per capita (PPP, Current International Dollar, 2021)

Data for Share of Private Final Consumption Expenditure is Financial Year Data. Data for Household Debt is calendar year data. Data Source: Ministry of Statistics and
Programme Implementation (https://www.mospi.gov.in/) , Statista (https://www.statista.com/) and Morgan Stanley. GDP: Gross Domestic Product. PPP: Purchasing Power 5
Parity
 Strong Corporate Balance Sheet

Corporate Balance sheets have turned out to be less leveraged and more profitable
boosting the corporate earnings cycle

Corporate Debt (% of GDP) Corporate Profit to GDP (%)

6.0%
64%
5.2%
62%
62% 5.0%

60% 4.0% 3.7%

58%
3.0%
56% 55%
54% 2.0%

52% 1.0%
52%
50%
0.0%
F2013

F2014

F2015

F2016

F2017

F2018

F2019

F2020

F2021

F2022

F2023E

F2024E

F2025E

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23
Data is as on March 31,2023. Data Source: Morgan Stanley and Avendus Spark. F: Financial Year. FY: Financial Year. E: Estimates. GDP: Gross Domestic Product. Past
6
performance may or may not sustain in future.
 Trends in Investment Rate over the Years
Investment Rate (%)
39 Unsustainable credit boom Balance Sheet repair Phase of growth • GoI’s high investment rate
& bad debt mounting (corporates & banks), banks & investment
from FY05 to FY12 was based
reluctant to lend to corporates recovery
37 on excessive borrowing which
36 was unsustainable
35
34 • Post FY12, banks were
33 reluctant to lend to corporates
& hence investment share in
31 GDP declined

30
29 • Investment share in GDP is
29
28 again rising given Govt.
27 reform of recapitalizing &
27
restructuring bank balance
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24 FAE
sheets

Source: Department of Economic Affairs (https://dea.gov.in/sites/default/files/The%20Indian%20Economy-A%20Review_Jan%202024.pdf), GoI – Govt. of India, FY –

Financial Year, GDP – Gross Domestic Product. Investment Rate is ratio of Nominal GFCF (Gross Fixed Capital Formation) over Nominal GDP. Data for FY24 is as per the 7
First Advance Estimates
 Economic War Chest

India has shed its ‘Fragile Five’ tag and is now going from strength-to-strength with its robust macros

Particulars Global Financial Crisis Taper Tantrum Covid-19 Current

(2008-09) (2013-14) (2020-21) (FYTD)

CPI Inflation (%) 10.4 8.4 7.2 5.5@

GDP Growth (%) 3.1 6.4 -5.8 7.2*

India’s share in World Exports 1.2 1.7 1.7 1.8

(%)^
Net FDI Flows ($, Bn) 22.4 21.6 43.9 4.9!

Govt. Capex Spends (INR Cr) 90,158 1,87,675 3,46,919 9,18,024&

GDP Per Capita ($, Current 1,014 1,560 1,913 2,392

Prices)
Forex Reserves ($, Bn) 278.0 288.3 547.3 594.3

Govt. Debt to GDP (%) 74 67 89 83#

Data is shown for Financial Year unless otherwise mentioned. Data Source: Equirus Research and Nuvama Research. Covid refers to Coronavirus Disease 2019, CPI: Consumer
Price Index, GDP: Gross Domestic Product, FDI: Foreign Direct Investment, Govt.: Government, Capex: Capital Expenditure, Bn: Billion, Cr: Crore. ^Data is of calendar year.
#Data as on June 30,2023 @Data as on Nov 30,2023 *Data for FY 22-23. Data till Sep 30,2023
8
 Economic War Chest

India’s forex reserves stand at USD 623 Bn as of Dec-2023, covering imports of more than 10 months

Forex Reserves (USD Bn)

600

500

400

300

200
Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

Dec-23
Source: Department of Economic Affairs (https://dea.gov.in/sites/default/files/The%20Indian%20Economy-A%20Review_Jan%202024.pdf), RBI. Data as of Dec 29, 2023.
USD Bn – US Dollar Billion 9
 Key Budget Announcements

HOUSING
CAPEX
• PM Awas Yojana (Grameen) achieved target of
3 Cr houses, additional 2 Cr targeted for next 5
• 11.1% increase in infra spending to 11.1 Lakh
Years
Crore (Approx. 3.4% of FY25 GDP) • Housing for middle class scheme to be launched

FISCAL DEFICIT LOGISTICS

• Fiscal consolidation roadmap maintained with FY • Implementation of 3 major railway corridor
24 numbers coming at 5.1% and FY 25 pegged at programmes under PM Gati Shakti for higher
4.5% efficiency and lower logistics cost

GROWTH IN TAX GREEN PUSH

RECEIPTS • Rooftop solarization for households (To
• Growth in tax receipts of merely 11%, approx. 1Cr Households)
marking a conservative approach • Adoption of e-buses for public transport and
Strengthening e-vehicle ecosystem

Source – www.indiabudget.gov.in and Kotak Institutional Research. Cr: Crore, FY: Financial Year. PM Awas Yojana Pradhan Mantri Awas Yojana is a credit-linked subsidy scheme by the Government of India to facilitate 10
access to affordable housing for the low and moderate-income residents of the country . PM Gati Shakti is an Indian megaproject to provide competitive advantage for manufacturing in India
 Thumbs Up to Macro Stability

The budget focused on fiscal consolidation without compromising on the growth engines,
which could bode well for Indian economy

Macro Announcement FY 23 FY24 RE FY25 BE Remarks Reaction

Strong roadmap for fiscal consolidation with FY-26

Fiscal deficit (%) 6.4 5.8 5.1 Positive
pegged at 4.5%

Net Market Lower market borrowing would help in lower

Borrowing 11.81 11.80 11.75 Positive
borrowing cost for corporates
(INR Lakh Cr)

Growth in Tax Conservative approach may result in lower fiscal

12.7 12.5 11.5 Positive
Receipts (%) slippages

Infra Spending Continued commitment towards high quality

10.0 9.5 11.1 Positive
(In INR Lakh Cr) expenditure without compromising on the fiscal

FY: Financial Year. Source – www.indiabudget.gov.in. ad Kotak Institutional Research. RE: Revised Estimates, BE: Budgeted estima tes 11
 Key Announcements & Sector Impact

Infrastructure Transport & Logistics Real Estate

• 11.1% increase in infra spending to 11.1 • Implementation of 3 major railway

Lakh Crore (Approx. 3.4% of FY25 GDP)
• Expansion of existing airports and
• PM Awas Yojana (Grameen) achieved
corridor programmes under PM Gati
target of 3 Cr houses, additional 2 Cr
Shakti for higher efficiency and lower
targeted for next 5 Years
logistics cost
• Housing for middle class scheme to be
development of new airports under
launched
UDAN scheme

Cement Insurance FMCG and Consumption

• Healthcare Cover under Ayushman Bharat • Allocated 1.27 Lakh Cr to Ministry of

• Target 2 Crore more houses in next 5
Scheme will be extended to more Agriculture & Farmer Welfare
years
Government workers
• However, muted revenue expenditure
• Focusing on Housing for middle class
growth of 3% may result in delayed
may benefit Cement Companies
pick-up in rural economy
Source – www.indiabudget.gov.in. Infra: Infrastructure, GDP: Gross Domestic Product, Cr: Crore. FMCG: Fast Moving Consumer Goods, UDAN: Ude Desh ka Aam Naag rik (A regional airport
development program of the Government of India and part of the Regional Connectivity Scheme of upgrading under -serviced air routes) The sector(s)/stock(s) mentioned in this slide do not 12
constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in this sector(s)/stoc k(s).
 Our Equity Outlook

• The interim budget scored high on fiscal prudence without compromising on high quality capital expenditure
• India’s macroeconomic situation remains strong and the budget cemented Government's commitment to
further bolster economic health
• We continue to remain positive on domestically facing sectors like Auto, Cement, Telecom etc.
• From a contrarian perspective, we are considering a few of the consumer staple names. Financials, Insurance
and Consumer Staples are some of the attractive pockets in the current market
• Although India’s Macros look robust, valuations are not cheap. This warrants for an investment approach in
hybrid and multi asset allocation schemes which aim to dynamically manage exposure to various asset classes
• For existing investors, we recommend to stay invested as India’s long-term growth story remains intact. For
investors who wish to add equity should focus on schemes that has flexible investment mandate to move
between Market cap & Sectors
• To conclude, we believe that dynamic macros may lead to Hybrid & Multi Asset Allocation schemes
outperforming in the coming years

The sector(s)/stock(s) mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may n ot have any future position in this sector(s)/stock(s).
13
 Our Fixed Income Outlook

• The Interim budget showcased Govt.’s over-arching focus towards maintaining macro stability
• Strong fiscal consolidation roadmap without compromising on growth engines like Capital expenditure bodes well for
the economy
• Also, fiscal impulse needs to be counter-cyclical in nature and currently with growth being strong, Govt.’s approach
towards fiscal prudence would help in avoiding overheating of economy
• Lower fiscal deficit resulting in lower borrowing program and passive flows in the coming months due to Global Bond
inclusion bodes well for the bond markets in short-term
• Revenue expenditure remained muted and may result in delayed pick-up in rural economy
• But, on the whole, we believe growth may continue to remain strong due to high quality spending and this may result in
RBI maintaining the neutral stance
• Global cues are expected to impact domestic macros bringing in a mixed bag - with optimism, fueled by a dovish US Fed,
and caution, as China stages recovery
• We continue to believe that duration needs to be played tactically and active duration management is the way forward
for navigating fixed income markets as the global factors remains challenging coupled with low probability for rate-cuts
RBI: Reserve Bank of India, US Fed: The Federal Reserve System of United States, 14
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