Interim Budget 2024 has Eye on 2047, Bet on Tech

In line with expectations, the interim Budget for fiscal 2024-25 kept an eye on long term goals. It made no attempt to please markets with near term sops.

At the outset, Finance Minister Sitharaman clarified that this Budget had its focus on 3 Ds - Demography, Democracy, and Diversity.

So, the vision for the Budget was keeping India's 2047 goals in mind.

Not surprisingly, technology related R&D and innovation was probably the only area wherein the government announced fresh allocation.

The Budget offered Rs 1 trillion allocation to R&D in the form of interest free or low interest long term loans to give a big boost to innovation.

This is keeping in mind the research facilities needed to power several megatrends that the Indian economy needs to leverage.

Research on electric mobility, green energy, semiconductors, medical technology, infrastructure, transportation, artificial intelligence are just few of the areas whether such funds could be deployed.

More importantly, the focus should be on intellectual property (IP), particularly patents.

India has witnessed a surge in innovation, with an average of 247 patents filed per day in 2023, the highest in the last two decades, according to a report by SBI Research and Indian Patent Office.

Patent filings increased by 17% to 90,309 in 2023, and the average patent pendency was reduced by 15 months to 53 months. As per the data, 0.84 m patents have been filed in the country until 2023.

A bill introduced in the Budget of 2023, the Anusandhan National Research Foundation Bill, has been instrumental in driving sizeable contribution from the private sector, to seed, grow and promote research and development (R&D). Hence the new allocation, in 2024, should be able to leverage the momentum.

The Budget aims at a slower growth in planned capital expenditure (11% compared to over 30% in past fiscal).

This significantly, eschews from big welfare spending. Rather it banks on high GDP growth and strong tax revenue. More importantly, it aims at improving India's fiscal deficit.

Here are few other takeaways from the Budget:

• Fiscal deficit target set at 5.1% suggests that the government will curtail market borrowing which can have benign impact on interest rates. Rates coming lower could be a positive for banks and rate sensitive sectors like housing and auto.

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• The government plans to offer solar rooftops to 10 m households, which could significantly boost the share of green energy in household energy consumption.
  
  In May 2023, the Parliament's standing committee on Energy had said that against a target of 40 GW to be achieved by the end of 2022, only 5.87 GW of rooftop solar projects were installed, which was less than 15% of the target.
  
  Currently grid-connected solar rooftop capacity stands at 11.1 GW out of the total solar capacity of 72.3 GW, according to the Ministry of New and Renewable Energy.
  
  Under the government's energy transition plans, solar power is expected make up 292 GW out of a total renewable capacity of 500 GW by 2030.
• Increased allocation to social programmes like MNREGA and PMKGY will continue to put more money in the hands of the poor and the farmers. This too can boost both savings and consumption megatrends.

By prioritising long-term prudence to short-term populist measures, the Budget has at least laid the ground for long term investment in equities.

With interest rates possibly heading lower globally, Indian equities are likely to remain a favoured asset class amongst not just domestic investors but also FIIs.

Do check the most attractive stocks from long term perspective on Equitymaster Screener.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)