India's Interim Budget 2024, presented by Finance Minister Nirmala Sitharaman, aims to promote fiscal prudence, boost infrastructure spending, and provide relief to taxpayers through no changes in the taxation structure. The budget places a strong emphasis on welfare programs, economic transformation, and social welfare initiatives. It also focuses on skill development and training, promoting investments, and harnessing new-age technologies. This article by YaMarkets, the best trading platform, gets into the key highlights of the budget and analyzes its impact on the economy and financial markets.

Highlights of the Interim Budget 2024

The Interim Budget highlights the government's commitment to various programs benefiting women, youth, the poor, and farmers. Finance Minister Sitharaman stressed that the country progresses when these sections of society progress. Notably, the government has successfully pulled 25 crore people out of poverty in the last ten years. This focus on welfare is expected to have a positive impact on the overall socio-economic development of the country.

Income Tax

• No changes proposed in tax rates for both direct and indirect taxes.
• Stability in taxation structure for relief to taxpayers and promotion of economic growth.

Infrastructure Development

• 11.1% increase in allocation for infrastructure development to ₹11.11 lakh crore.
• Aims to foster sustainable economic growth and create a robust infrastructure ecosystem.

Railways

• Adapting 40,000 rail bogies to meet the Vande Bharat standards.
• Development of new railway corridors, including port connectivity, to facilitate seamless connectivity and promote trade.

'Lakhpati Didi' Scheme

• Extension of the successful scheme with an increased target from 2 crore to 3 crore beneficiaries.
• Expected to uplift rural women, enhance financial independence, and stimulate the rural economy.

Electricity and Green Energy

• Comprehensive plan to promote the adoption of renewable energy sources.
• 10 million households to receive up to 300 units of free electricity through rooftop solarisation.

Electric Vehicles

• Strong emphasis on expanding and strengthening the electric vehicle (EV) ecosystem.
• Aim to encourage the adoption of electric buses and boost charging infrastructure.

Tourism

• Encouragement for states to develop iconic tourist centers with a rating system based on facilities.
• Provision of long-term interest-free loans to support development.

Promoting Investments

• Aim to attract sustained foreign investment through bilateral investment treaties.
• Conducive environment for investment and economic cooperation between India and international counterparts.

Technology

• Acknowledgment of the impact of new-age technologies on various sectors.
• Establishment of a ₹1 lakh crore corpus for long-term financing or refinancing to promote research and innovation.

PM Awas Yojana

• Continuation of the PM Awas Yojana despite challenges posed by the COVID pandemic.
• Plans to build two crore more houses in the next five years to address housing needs of economically weaker sections.

MSMEs

• Emphasis on providing training for Micro, Small, and Medium Enterprises (MSMEs) to enhance competitiveness.
• Focus on promoting growth and encouraging investment for job creation and economic development.

Agriculture and Food Processing

• Efforts to enhance value addition in the agricultural sector and boost farmers' income.
• Implementation of schemes to reduce postharvest losses and improve productivity.

Fiscal Numbers

• Fiscal deficit target for FY 2024-25 set at 5.1% of GDP.
• Revised fiscal deficit target for FY 2023-24 is 5.8%.
• Capital expenditure for FY 2024-25 increased to ₹11.1 lakh crore, reflecting commitment to fiscal prudence and sustainable economic growth.

The Impact of Interim Budget on Financial Markets

The Interim Budget has had a positive impact on the Indian Rupee (INR) and the domestic currency market. Forex traders noted the positive sentiment surrounding the budget, leading to a strengthening of the INR against the U.S. dollar. The reduction in the fiscal deficit to 5.1% of GDP for FY 2024-25 was particularly well-received by traders. Additionally, the weakening U.S. dollar in the overseas market contributed to the positive market response.

In January 2024, the INR traded steadily around a flat line, maintaining a mild positive bias. It emerged as the top-performing currency in Asian markets, appreciating by 1% to 2%. This resilience can be attributed to foreign portfolio inflows and the Finance Ministry's review highlighting India's economic strength, robust domestic demand, investment-led strategies, and macroeconomic stability.

Looking ahead, investors are closely monitoring the Federal Open Market Committee (FOMC) meeting and India's Interim Budget for FY 2024-25. The Finance Ministry projects India to become the world's third-largest economy with a GDP of $5 trillion over the next three years. However, external risks such as inflation, slow global growth, and geopolitical tensions could pose threats to the market outlook.

The stability of the INR can be credited to the Reserve Bank of India's (RBI) timely interventions in the foreign exchange market. The Fiscal Budget for FY 2024-25 aims to lower the fiscal deficit to 5.30% of GDP and reduce the budget deficit to 4.5% of GDP by FY 2025-26. These measures, along with the focus on welfare spending, are expected to contribute to economic stability and growth.

Technical Analysis of INR

In terms of technical analysis, the INR continues to consolidate in the 82.78 to 83.45 range against the U.S. dollar. The USD/INR pair is confined within a descending trend channel, with a potential upside supported by being above the key 100-period EMA. However, the 14-day RSI indicates the current directionlessness of the pair. Resistance at 83.25 and support at the 83.00–83.05 zone are key levels to watch for potential market movements.

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