The specific provisions of the budget, coupled with global economic conditions, will determine the direction and pace of M&A deals in the coming year. This article merges the broad strokes of the Budget 2024, offering a holistic view of the potential impacts on India’s M&A activity. It underscores the budget’s role as a pivotal element in shaping the economic narrative. It sets the stage for an anticipated resurgence in M&A activity bolstered by strategic investments and policy reforms.

India’s mergers and acquisitions (“M&A”) activity took a nosedive in 2023. As per the data collected by Bloomberg, while 2022 was record-breaking and the deal value had reached $192 billion in India, it plunged by 63 per cent in 2023 to $70.9 billion.

The plunge is attributable mainly to several geo-political factors, including a sluggish global economy, high-interest rates by the US Federal Reserve and several international conflicts. While 2024 is likely to see a reversed trajectory and the Indian M&A market is expected to bounce back from the slump of 2023, the upcoming general elections and the 2024 budget have kept market players from making significant moves.

As India stands on the cusp of a pivotal fiscal year with the announcement of the Budget 2024, the contours of the nation’s economic and business landscape are poised for significant transformation. Spearheaded by Finance Minister Nirmala Sitharaman, the budget outlined a strategic blueprint to catalyse growth across several sectors—infrastructure, healthcare, education, and technology—each of which plays a critical role in shaping India’s M&A narrative.

A reflection on M&A trends: The trajectory of mergers and acquisitions (M&A) in India has been a rollercoaster of highs and lows, with 2022 marking a record-breaking year with deals amounting to $192 billion. However, 2023 saw a stark decline, with M&A activity plummeting by 63% to $70.9 billion, influenced by geo-political tensions, a sluggish global economy, and monetary tightening by central banks like the US Federal Reserve. This downturn sets the stage for a year where recovery and strategic recalibration could define the M&A landscape, especially in the wake of the forthcoming general elections and the anticipations surrounding the Budget 2024. In terms of mergers and acquisitions (M&A), the 2024 budget is expected to foster an environment conducive to business, particularly in the sectors of renewable energy, electric vehicles, and battery storage, aligning with the global emphasis on environmental, social, and corporate governance (ESG), and technological innovation. Key Indian corporations are reportedly pursuing acquisitions in these areas, supported by government reforms designed to encourage foreign investment and domestic M&As through streamlined regulatory approvals and sectorspecific incentives. These efforts are anticipated to maintain the resilience of India’s M&A activities in 2024, despite the challenges posed by global issues and economic uncertainties in the preceding year

Budget 2024, A Catalyst for M&A revival: While the budget, announced recently, is expected to be a vote on account, the entire fiscal plan still holds immense potential to steer the M&A domain in new directions. Key provisions likely to impact M&A activity includes: Infrastructure Spending: The government’s commitment to ramping up investments in infrastructure—airports, roads, railways—could invigorate related sectors, spurring consolidation, joint ventures, and heightened investment interest, paving the way for a surge in M&A deals within the construction, engineering, and materials sectors. Bank Privatization and PSU Disinvestment: Anticipated announcements regarding the privatisation of public sector banks and disinvestment in public sector undertakings (PSUs) could fuel M&A activities in the financial sector, opening up avenues for strategic acquisitions and partnerships.

Expansion of PLI Scheme: The Production-Linked Incentive (PLI) scheme, aimed at promoting domestic manufacturing across several sectors, including electronics, pharmaceuticals, and renewable energy, is expected to be expanded. This move could attract investments, driving M&A activity as companies look to scale up production capabilities and tap into new markets. Boost to Tech Infrastructure: Significant allocations for developing India’s tech infrastructure could catalyse M&A among telecom companies, infrastructure providers, and tech service firms, aiming to capitalise on the burgeoning demand for digital services. Renewable Energy Focus: With India’s goal to achieve 500 GW of non-fossil-based electricity generation capacity by 2030, the budget will likely earmark substantial funds for renewable energy, potentially driving consolidation and attracting investments in electric vehicles and allied industries.

Defence Sector Modernization: The expected increase in capital allocations for the defence sector’s modernisation and initiatives to deregulate and streamline investment inflows could lead to a spurt in M&A activities within aerospace and defence manufacturing.

Looking Ahead, Navigating the M&A landscape: The specific provisions of Budget 2024, intertwined with global economic conditions, are set to dictate the pace and direction of M&A deals in India. As the nation gears for strategic growth and recalibration, the M&A sector is expected to witness a rebound driven by policy initiatives and a conducive business environment. The budget’s focus areas – infrastructure, privatisation, manufacturing incentives, and technology – each herald a promising avenue for M&A activity, signalling a dynamic transformation and opportunity period in India’s business landscape. As India navigates through the complexities of a global economic recovery and internal policy shifts, the M&A story 2024 is likely to be one of resilience, strategic foresight, and renewed vigor, underpinned by the foundational policies laid out in the Union Budget.

Ritesh Dudeja is a Partner of Acclime India, and Sidharrth Shankar is a Partner at JSA, Advocates & Solicitors. Views expressed are personal.