Budget 2024: There could be a 'kahani me twist' in Nirmala Sitharaman's speech today

There could be a 'kahani mein twist' in Budget 2024, which will be unveiled shortly, according to Radhika Gupta, MD & CEO of Edelweiss AMC. Unlike previous budgets that balanced fiscal prudence with capital expenditure and infrastructure development, this budget must address the middle class, Gupta told ET Now in a conversation. 

Gupta says the previous Budget focus was on maintaining fiscal prudence while boosting capital expenditure and planning for 2047. This approach has been well-received by both stock and bond markets. However, the twist this year lies in addressing middle-class concerns, she said. 

The Economic Survey warns that any financial market correction could impact household savings. Overconfident speculative investments in financial markets are also problematic. Banks are noticing a shift of funds towards mutual funds, and the regulator highlights the overheating of the F&O market.

Gupta distinguishes between productive liquidity, which goes into SIPs and sensible stock investments, and speculative liquidity, prevalent among young traders in the F&O market. She stresses the importance of channeling liquidity into capital formation, which supports market stability and self-sufficiency.

Despite some noise about private investment stagnation, Gupta observes optimism and evidence of calibrated capital expenditure among businesses. Capital goods companies, cement, power, and steel sectors are showing significant growth and high capacity utilization.

Mohandas Pai, Chairman of Aarin Capital, also highlighted the growing dissatisfaction among India’s middle class regarding their disproportionate tax burden in the world's most populous nation. "The middle class across the country is very unhappy. They pay the majority of the taxes but do not receive adequate tax deductions. High inflation, rising costs, increased student fees, and poor urban living conditions despite some improvements are major concerns,” said Pai. He emphasized the need for a reduction in taxes to alleviate these burdens.

Pai criticized the recent tax slab policies introduced in the last two budgets, noting that income tax collections have risen by 20 to 22 percent. He argued for a reduction in taxes rather than introducing multiple new slabs and offering limited housing-related tax breaks. “Only one crore people have housing loans, while 6 to 7 crore people, including pensioners, earn a salary,” he pointed out.

A LocalCircles survey, which included 21,000 respondents from 327 districts, revealed that 48 percent of households expect a reduction in income and savings by the end of the financial year 2024-2025. This trend is driven by the rising costs of living, which outpace income growth, making it increasingly difficult for households to maintain their standard of living.