Budget Updates
Sectors in Focus
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Low-Cost Housing
Indian real estate sector is booming. The affordable housing segment not so much as sales drop because of higher costs. While home sales in India’s top 8 cities hit a 11-year high in the first half of 2024 at 1,73,241 (up 11% YoY), the number of affordable homes sold is shrinking.
Share of houses sold below Rs 50 lakh (affordable housing) in India’s top 8 cities is down to 27% in H1 2024 vs 32% in H1 2023. Rising interest rates and home prices suppressed demand. In 2018, new homes sales in this category used to be 54%.
After the new government was elected, one of the first decisions taken was to approve building 3 crore homes under its flagship PM Away Yojana. This will include credit-linked subsidies that could reduce borrowing costs. News reports suggest that income threshold to be eligible for the interest subsidy could be raised. -
Infrastructure
Infrastructure investments by the Centre have been the buzz word over the past few years. The focus on capital expenditure (capex) has helped boost India’s economic growth coming out of the pandemic.
In 2023-24, the Centre had allocated over Rs 10 lakh crore for capital expenditure across various ministries like roads, railways, urban development, among others.
The expectation ahead of the Union Budget 2024 is that this trend will continue. There was a 11% increase in capex in the interim budget in February 2024 to over Rs 11 lakh crore, and news reports also suggest that the Centre will focus on infrastructure development in the budget.
The question is which sector will get a larger allocation than announced in the interim budget. Will it be roads, railways, power, or urban development? This has kept investors are traders all guessing alike. -
Defence
Defence is a hot sector ahead of the budget. With India’s stated intent of indigenisation of its defence supplies and equipment, the target is to achieve Rs 3 lakh crore domestic production by 2028-29.
While the focus is on domestic manufacturing of defence equipment and spares, there is also an emphasis on exports. Defence exports touched Rs 21,083 crore in 2023-24, and the Centre aims to push this to Rs 50,000 crore by 2028-29.
In anticipation of measures to boost defence indigenisation in the Union Budget, many defence companies’ shares have run up.
All eyes are on the Union Budget to see if the Centre increases its allocation for defence capital expenditure, which might increase domestic procurement of equipment. -
Renewables
India’s ambitious renewable energy installed capacity target of 500GW by 2030 needs large investments. This has put almost all companies in the value chain into focus over the past few years, be it EPC contractors, developers, power plant operators, and even engineering services companies.
To achieve the 500 GW target, India will have to set up at least 50 GW capacity every year. For context, in 2023-24, 18.5 GW renewable capacity was set up in India.
The Centre’s focus on promoting local manufacturing means that there are higher tariffs on imports of inputs like solar cells, and other equipment. The industry is hoping for extension of lower corporate tax rate for new manufacturing units to lower the cost of localization, more sustainability linked funding, innovative incentives to improve localization, among others.
Centre’s roof-top solar power policy piqued the interest of investors in companies like Tata Power, Waaree Renewables, KPI Green, Sterling and Wilson Solar, among others.
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