As Prime Minister Modi's government embarks on its third term, Finance Minister Nirmala Sitharaman's Union Budget presentation on July 23, 2024, in the Lok Sabha is highly anticipated. This budget is set to establish the economic direction for Modi 3.0, focusing on economic growth and job creation through significant infrastructure investments. While the event (Union Budget) is not likely to disrupt the volatility of the share market as it did back during the results of the Lok Sabha elections, investors may still have to brace for a stronger volatility driven by investor and trader sentiments.
Continued Emphasis on Infrastructure
After securing a decisive victory in the recent Lok Sabha elections, the Modi administration is poised to maintain its aggressive infrastructure spending. Earlier this year, in the interim budget, Sitharaman announced an 11% increase in capital infrastructure spending for the next fiscal year, raising the capital expenditure outlay to ₹11.11 lakh crore. This follows a substantial 33% hike the previous year, highlighting the government's dedication to large-scale infrastructure development as a driver of economic growth. Along with the BSE SENSEX, other indices , especially BSE Realty and BSE India Infrastructure, which collate companies listed under the infrastructure sector, have seen an upward momentum, with the BSE Realty raising from 7,758 in May 2024 to 8,740 in July 2024.
Investment in Road and Rail Sectors
Significant allocations are expected for the road and rail sectors. In February, the Ministry of Road Transport and Highways was allocated ₹2.78 lakh crore, a 2.8% increase from the previous year. Indian Railways received ₹2.55 lakh crore, building on last year’s historic allocation of ₹2.4 lakh crore. These funds will support the development of three major economic railway corridors and various modernization projects. Rail Vikas Nigam Ltd, one of the listed stocks has generated massive returns to investors soaring from 117 in 2023 to breaking the 600 mark in 2024! Railway stocks listed on BSE and NSE have seen tremendous buying demand from the investors, turning them significant multibaggers in investors’ portfolio.
Development of Railway Corridors
The new railway funds will facilitate the creation of three significant economic corridors focusing on energy, mineral, and cement transportation, port connectivity, and high-traffic density routes. Part of the PM Gati Shakti initiative, these projects aim to enhance logistics efficiency, reduce costs, and decongest the existing rail network, thereby improving both freight and passenger services.
Expansion of Vande Bharat Trains
The government has ambitious plans to expand the Vande Bharat train fleet. Currently, there are around 80 Vande Bharat trains in operation, with a target to convert 40,000 existing rail bogies to Vande Bharat standards. Additionally, trials for Vande Bharat sleeper trains are set to begin soon, with operational services expected to start within the next six months. The goal is to introduce 250 sleeper Vande Bharat trains by 2029, enhancing passenger safety, convenience, and comfort.
Affordable Housing Initiatives
India's affordable housing sector has gained momentum in recent years, driven by government initiatives. With a rapidly expanding population and increasing demand for affordable homes, the upcoming 2024-2025 budget is expected to lay the groundwork for significant advancements in this sector. The government is anticipated to allocate strategic funds and implement policy measures to transform affordable housing, aligning with the vision of achieving "Housing for All" by 2025. IPOs in this segment have recorded a significant momentum, especially Aadhaar Housing Finance, which is presently trading at a price of 462 a piece against its issue price of Rs 315 in March 2024. The Indian Housing Finance market which is projected at $385 Billion includes some of the major players including State Bank of India, LIC Housing Finance, HDFC, ICICI Home Finance, Axis Bank Home Finance among others. The encouragement to the Affordable Housing initiative will propel further growth in the sector and to the players included in it.
Addressing Financing Challenges
One critical area where budget interventions could have a substantial impact is addressing financing challenges for developers and homebuyers. Enhancing refinancing options for Non-Banking Financial Companies (NBFCs) and expanding home loan benefits under Section 24 of the Income Tax Act could ease the real estate sector's credit crunch and incentivize first-time homebuyers. Additionally, introducing tax incentives for investments in private rental housing projects could provide a viable solution for accommodating migrant workers and young professionals who prefer rental options.
Final thoughts
The 2024-2025 budget is not merely about allocating funds; it’s about envisioning India’s urban future. With the right incentives and policy frameworks, we can create affordable housing solutions that foster vibrant communities, driving economic growth and societal advancement. The emphasis on infrastructure and housing is poised to set the foundation for sustained growth and development in Modi 3.0.
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