New Delhi: The interim budget for the financial year 2024-25, presented by Finance Minister Nirmala Sitharaman on Thursday (February 1), failed to meet the expectations of the investors, who were hoping for some relief measures amid the economic slowdown. The stock market witnessed high volatility throughout the day, as the budget did not announce any major stimulus or tax cuts to boost growth and consumption. The Sensex and Nifty, which had closed on a positive note on January 31, reversed their gains and ended in negative territory.
The Bombay Stock Exchange Sensex, based on 30 shares, closed at 71,645.30, down by 107 points or 0.15 percent from the previous close. The National Stock Exchange Nifty, based on 50 shares, closed at 21,697.45, down by 28.25 points or 0.13 percent from the previous close. The broader market indices also witnessed selling pressure, as the BSE Midcap and Smallcap indices fell by 0.41 percent and 0.55 percent respectively.
The budget, which was the last one before the general elections in May, focused on the welfare schemes for the farmers, women, and the poor, and announced an increase in the defense budget and the health expenditure. The budget also estimated a dividend income of Rs 1.02 lakh crore from the Reserve Bank of India (RBI) and public sector financial institutions for the next financial year, which is slightly lower than the Rs 1.04 lakh crore received in the current financial year. The government had revised its dividend estimate for the current financial year from Rs 48,000 crore to Rs 1.04 lakh crore after the RBI transferred a surplus of Rs 87,416 crore in May last year. In the last financial year, the government had raised Rs 39,961 crore from RBI and public sector financial institutions.
The budget also projected a fiscal deficit of 3.5 percent of GDP for the next financial year, which is higher than the 3 percent target set by the Fiscal Responsibility and Budget Management (FRBM) Act. The fiscal deficit for the current financial year is estimated at 3.8 percent of GDP, which is also higher than the 3.3 percent target. The government invoked the escape clause under the FRBM Act, which allows it to deviate from the fiscal deficit target by 0.5 percent in case of exceptional circumstances.
The market experts said that the budget lacked any concrete measures to revive the economy, which is facing a slowdown due to the impact of the coronavirus pandemic and the lockdowns. They also said that the budget did not address the issues of the banking sector, which is grappling with high non-performing assets and low credit growth. They added that the market will now look forward to the monetary policy review by the RBI on February 5, which may announce some rate cuts to support the economy.