Focusing on boosting growth and on stability through continuing emphasis on infra and consumption inducing measures, the Budget is likely to be positive for Indian equity. Consumer and infra/capital goods sectors are likely to be the main beneficiaries. Despite the likely acceleration of revenue spending and the continued high growth in public capex, with favourable receipts, fiscal consolidation is likely to continue. We expect the FY25 fiscal deficit to be 5% of GDP. There is little reason to expect a populist budget
BUILDING IN MODEST DECELERATION FOR ALL BUT CORPORATE TAX IN FY25
Income tax, the biggest category; corporate tax now behind even GST. GST, corporate tax and personal income tax each now account for nearly 30% of gross tax collection. Yet, each has followed a distinct trajectory since FY19. With a sharp cut, the corporate tax growth rate has been the slowest and most volatile. Personal income tax has grown the fastest and emerged as the government’s largest resource mobiliser, replacing corporate tax. GST followed a steady path and has overtaken corporate tax collection since FY23. Of the major taxes, customs duty brings in the lowest revenue
Counter-intuitive trends. Despite a huge jump in corporate earnings in FY24, corporate tax growth was modest. By contrast, despite low private consumption growth and falling inflation, both income tax and GST collection recorded better growth rates in FY24. We expect deceleration in all major tax categories except corporate tax in FY25 vs. FY24
