Key Themes and Sectors to Watch:

The budget is expected to focus on boosting growth through economic activities, with a continuous emphasis on infrastructure development and measures to increase disposable income. Job creation is a key priority for the Modi 3.0 government, with higher allocations likely for PLI schemes, labor-intensive sectors, and programs like Man REGA. The government’s higher-than-expected transfer from the RBI will provide an additional Rs 1.25 trillion in non-tax revenue, offering about Rs 1.4 trillion available for government spending.

Healthcare Focus:

The healthcare sector is expected to benefit significantly, with an emphasis on enhanced digital infrastructure and spending. The government plans to spend about 2.5% of GDP on public health initiatives, particularly the Ayushman Bharat scheme. India’s position as a global leader in medical tourism also necessitates lower-cost financing and tax incentives, potentially including a 10-15 year tax holiday and viability gap funding for setting up hospitals in tier two and three cities.

Infrastructure Investments:

Infrastructure development remains a focal point, with significant funds expected for highways, railways, and urban infrastructure. The National Infrastructure Pipeline and Gati Shakti master plan are likely to receive 10-15% higher allocations compared to last year. Specific areas of focus include dedicated freight corridors, high-speed railways, bullet trains, and smart cities. Asset monetization could also contribute Rs 55-60,000 crore from selling infrastructure assets to foreign investors.

Tax Reforms:

Revisions in income tax slabs are anticipated to provide relief to the middle class, potentially increasing the basic exemption limit and adjusting income thresholds. The deduction under Section 80C, last revised in 2014, may see an increase. Additionally, standard deductions for individuals and tax incentives for labor-intensive and green energy industries are expected.

Support for MSMEs:

Enhanced support for local manufacturing and MSMEs is likely, with potential benefits for key sectors like textiles, electronics, and automotive components. Access to funds for MSMEs is crucial, and the government may introduce schemes to facilitate lower-cost working capital loans and capital subsidies.

Clean Energy:

The government aims to achieve a target of 500 GW of renewable energy capacity by 2030, requiring significant reforms and public-private partnerships. Increased budgetary allocations are expected for the National Green Hydrogen Mission, hydropower, and pump storage hydropower plants. Investors can consider investing in green energy sectors through stocks or mutual funds focusing on renewable energy.

Agricultural and Rural Development:

The budget is expected to allocate resources towards welfare schemes, job creation, rural housing, and agriculture. Micro-irrigation, rural infrastructure, and initiatives like Pradhan Mantri Awas Yojana and Gramin Sadak Yojana are likely to receive increased allocations. The focus will be on improving agricultural efficiency and supporting non-farm income through infrastructure projects.

Top Investment Sectors:

Based on the budget projections, top investment sectors include infrastructure development, financialization of savings, and consumption-related sectors driven by rising disposable income. Key opportunities lie in construction companies, engineering stocks, and financial institutions supporting MSME growth.

Potential Negatives:

Conclusion: