Separately, non-tax revenue would still be healthy, led by RBI dividend amid consistent FX sales, but may fall short of last year’s bumper surplus. Regarding conventional divestment, the windfall gains may face pressure from stake sales of Government’s large holdings, which are mainly concentrated in commodity companies and the utilities sector.

The upcoming budget, being interim in nature, is likely to be a non-event as far as big-bag announcements, new tax or spending pitches are concerned, the report said.

However, it will still set the stage for policy choices ahead and will be watched for the pace of fiscal consolidation and policy priorities on capex and non-capex spending. We expect the policy direction and prerogatives to remain largely similar to that for the recent budgets, as the trade-offs remain between nurturing growth recovery and the diminishing fiscal space with challenging debt dynamics.

Dhiraj Relli, MD & CEO, HDFC Securities said although there would be some buildup of expectations ahead of the vote on account, we think that major policy reforms and announcements may get postponed to the regular Budget due in June/July 2024. Capex and fiscal consolidation path followed in the vote on account would be monitored closely given their impact on growth and interest rates. The Govt will have to maintain a balance between the two as higher capex could postpone the fiscal consolidation journey.

The capital markets may get a little excited by the vote on account but may prefer to wait for the general election outcome and the regular Budget before getting very bullish, he said.