UNION BUDGET 2023-2024 of India
UNION BUDGET 2023-2024 IMPACTS ON THE STOCK EXCHANGE MARKET
What is the Union Budget of India?
The Union Budget of India contains a list of financial proposals and estimates. It is often referred to as the “Annual Financial Statement” under Article 112 of the Constitution of India. As the name suggests, a national budget is prepared for each economic period, containing estimates of government revenues and expenditures. The budget is seen as an economic roadmap and is a long process as it requires months of meetings of central and state ministries, authorities, and departments. The performance of the previous year’s budget is taken into account when preparing budget calculations and guidelines for the next year.
Provisional budget or statement of accounts usually published in an election year. The preliminary budget contains a complete accounting document that includes both income and expenses. However, once the election is successful, the winning government will announce the entire budget later, and what is presented in the interim budget can be changed in the final document. The interim budget is estimated for the next two to four months.
Who prepares the budget?
Every year, the Budget Department of the Economic Department of the Ministry of Finance deals with the task of mapping the basic budget of the state, but the process is not done alone, several ministries participate in it.
Their role is to prepare detailed financial forecasts of government spending and expenditure for the coming year. Corrected estimates from the previous fiscal year are also considered to forecast important data.
Departments involved in the preparation of the budget of the Union: – Ministries of the Union; Departments of the Ministry of Finance such as Ministry of Finance, Ministry of Expenditure, Ministry of Revenue, Department of Investment and Public Asset Management (DIPAM) and Department of Financial Services; other ministries; autonomic organs; States and Union Territories, Revenue Department; and other forces.
These departments carry out extensive consultations to prepare the final budget.
Announcement of Union Budget 2023
Union Budget 2023-2024 was announced by Finance Minister Nirmala Sitharaman on February 1 this year. The Union budget affects the entire country and its economic growth. This important document tells about the projected costs and revenues for the next fiscal year. So the budget is very important for every industry and every citizen of the country. People can watch the budget live on DD News, Lok Sabha TV, Rajya Sabha TV, and other news channels. The public can also watch the budget on the official YouTube and Twitter channels of Lok Sabha and Sansad TV.
Along with the companies and various sectors of this country, the budget also affects the Indian stock market. The size of the deficit and the way it is financed affects the money supply and the interest rate in the economy. High-interest rates mean higher capital costs for the industry, lower profits, and therefore lower stock prices. Similarly, an increase in indirect taxes would affect the stocks of companies that produce goods and services.
Morgan Stanley India Managing Director Ridham Desai noted that the government’s deficit target and changes in long-term capital gains tax, and spending plans could affect the stock market. In a pre-budget report, Desai noted, “The impact of the Budget on the market has been secular, although the actual outcome depends on pre-budget expectations (as measured by a market performance at pre-budget levels). Participants still need to negotiate volatility.
According to him, the impact of the Union Budget on the short-term development of the STOCK market is decreasing, but the volatility has increased since 2019 and reached an 11-year peak in 2022. So, volatility is visible on this date.
How does the budget 2023 affect the stock market?
The Union Budget of India plays an important role in the country’s economy, interest rates, and stock market. In general, the development of the stock market reflects economic conditions. In addition, there is a long-run relationship between stock prices and interest rates. The accounting funds that the Minister of Finance announces that he invests and spends affect the public finance deficit. This will change India’s money supply, economy, and interest rates.
In general, when interest rates are high, it raises the industry’s cost of capital, which affects profitability and thus lowers stock prices. The opposite is true when interest rates are low.
According to research, long interest rates are negative for the stock market, while short interest rates are positive for stocks.
The maturity of long-term interest in government bonds is 10 years. The lender’s asking price, the borrower’s risk, and the reduction in the value of capital is taken into account when drawing interest rates. A lower long-term interest rate encourages further investment, while higher interest rates discourage it. These investments are crucial for economic growth. Higher bond yields continue to add to the discomfort in the stock market.
The Minister of Finance controls the calculation of income and expenses during the preparation of the union budget. The government then, in consultation with key financial advisors, decides on the optimal level of borrowing to achieve the budget deficit target. These are called external government loans and consist of bilateral and multilateral aid. In particular, part of the revenue shortfall remains unfilled so that it can be covered by issuing temporary government debt.
Foreign loans depend on the public finance deficit target that the government wants to achieve for itself in the next financial period.
The tax measures announced in the Union budget give an overview of the expenses of the common man.
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