As the Union Budget 2024 is set to be unveiled next month, the financial sector leaders recognise the delicate balance required to navigate the current economic complexities. At an ETBFSI discussion on expectations from the Interim Budget, industry captains rooted measures that will support growth, enhance fiscal discipline, and strengthen the foundation for a resilient and inclusive economy.
Rajiv Yadav, MD and CEO of Fincare Small Finance Bank, stressed the continued importance of digital transformation. He emphasized, “Digital push should continue in various forms. It’s been the bedrock of the transformation which this country is seeing.”
Yadav highlighted the recent shift in liquidity dynamics within the banking system. “In the third quarter of the current financial year, after 18 successive quarters, the banking system was in a net liquidity deficit,” he noted. This signals the end of the stimulus phase, with a 250 basis points increase in the repo rate over the last five policies.
Yadav expressed hope for lower interest rates in 2024. “We are seeing a trend towards a flattening of the interest rate curve, with a potential decline in the latter half of the year,” he said.
Emphasis on social security
Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, highlighted the need for a comprehensive approach to social security. Singhel pointed out, “Our job is on the protection side. What is pushing our growth down? We need to address the concerns that are going to come in the country.”
Singhel brought attention to the broader scope of social security. He urged leaders to assess what factors may be hindering growth and emphasized the need for discussions on ageing populations, health coverage, and social security measures. He advocated for a comprehensive approach to address challenges and ensure sustained economic growth.
Singhel highlighted the potential for government spending, emphasizing the importance of quality spending, particularly in infrastructure. “The government needs to prioritise capital expenditure to stimulate economic growth. Achieving fiscal consolidation targets is crucial,” Tapan stated.
Fiscal consolidation
Gaurav Kapoor, Chief Economist and SVP at IndusInd Bank, urged the government to accelerate fiscal consolidation. He noted, “While these are times of euphoria and when things are going good, focus on what the misses are and address it before it blows out of proportion.”
He underscored the importance of reducing the fiscal deficit to alleviate the market borrowing program’s strain on the government. Kapoor urged for a balanced approach to reduce spending while maintaining the quality of investments, especially in critical areas like infrastructure.
Hardika Shah, Founder and CEO of Kinara Capital, focused on stimulating the manufacturing sector. She stressed the importance of translating ambitious targets into tangible support. “We talk a lot about this ambitious target of the contribution of MSMEs going from 30% to 50% in manufacturing. We need to enable that,” Shah remarked, calling for initiatives that foster growth and investment in the manufacturing landscape.
“Stability in unsecured lending schemes and market-aligned interest rates will enhance capital flow to MSMEs,” she remarked.
Shah stressed the need for focused spending on sectors with a multiplier effect on the economy. “Public-private partnerships in climate financing are essential to meet net-zero goals by 2030,” she added.
