Interim Budget 2024: Finance Minister Nirmala Sitharaman presented the Interim Union Budget for the fiscal year 2024–25 to the Parliament earlier today. This was the final budget of the second term of the government headed by Prime Minister Narendra Modi and the sixth one to be given by the current FM. In July of this year, following the formation of the new government following the Lok Sabha Elections, the entire budget will be presented.
The budget prioritized trains, green growth, infrastructure, agriculture, and fiscal consolidation. Salaried individuals were disappointed that there was no alteration made to the tax rates.
Better than anticipated, the fiscal deficit target for FY25 was set at 5.1 percent of GDP, and the target for FY24 was also reduced down to 5.8 percent. Concurrently, the FY25 capital expenditure objective was raised by 11.1 percent to ₹11.1 lakh crore.
"Over the past ten years, there has been a positive development in the Indian economy. With hope, people are turning towards the future. 2014 saw the nation confronting many difficulties. The Narendra Modi-led administration overcame those obstacles with Sabka Saath, Sabka Vikaas," Finance Minister Sitharaman stated during her budget speech.
According to Sitharaman, the next five years will see unheard-of growth as the nation works towards its 2047 development target. She stated that the "trinity of democracy, demography and diversity can fulfil the aspirations of every Indian" .
In addition to sticking to fiscal responsibility with a lower fiscal deficit—which may be welcome news to foreign investors—and the upcoming inclusion of a $25 billion bond in June—the FM has continued to focus on strengthening domestic macro factors, such as sustained investments in infrastructure, agriculture, and domestic tourism. Lower borrowing costs and budget deficits will also help drive down yields. Co-founder and vice-chairman of the Anand Rathi Group Pradeep Gupta speculated that it would pave the way for an increase in ratings.
The budget places a strong emphasis on tourism, logistics, infrastructure, and innovative research. The economy will continue to grow sustainably as a result of all these initiatives. According to Gupta, this demonstrates the current government's ongoing commitment to implementing fiscal discipline and achieving the desired fiscal deficit of 4.5 percent of GDP by FY26.
Let's examine the 14 main features of the 2024 Budget, which range from income tax to green energy and tourism:
Income Tax: During her budget speech, Sitharaman stated, "...I do not propose any changes in tax rates in direct and indirect taxes, including import duties."
According to Sitharaman, the next five years will see unheard-of growth as the nation works towards its 2047 development target. She stated that the "trinity of democracy, demography and diversity can fulfill the aspirations of every Indian" .
In addition to sticking to fiscal responsibility with a lower fiscal deficit—which may be welcome news to foreign investors—and the upcoming inclusion of a $25 billion bond in June—the FM has continued to focus on strengthening domestic macro factors, such as sustained investments in infrastructure, agriculture, and domestic tourism. Lower borrowing costs and budget deficits will also help drive down yields. Co-founder and vice-chairman of the Anand Rathi Group Pradeep Gupta speculated that it would pave the way for an increase in ratings.
The budget places a strong emphasis on tourism, logistics, infrastructure, and innovative research. The economy will continue to grow sustainably as a result of all these initiatives. According to Gupta, this demonstrates the current government's ongoing commitment to implementing fiscal discipline and achieving the desired fiscal deficit of 4.5 percent of GDP by FY26.
During her budget speech, Sitharaman stated, "...I do not propose any changes in tax rates in direct and indirect taxes, including import duties." The FM declared that tax receipts have more than doubled over the past ten years, despite the fact that the tax framework remained unchanged in this budget. She also mentioned that this year's average tax return processing time was lowered to 10 days.
"The Finance Minister notes a noteworthy accomplishment, pointing to a doubling of tax revenue in the last ten years. Interestingly, import duties and other direct and indirect taxes are kept at the same levels in the current budget. According to Samco Securities research analyst Siddhesh Mehta, "Companies may find this predictability helpful in navigating their financial planning, fostering a more secure and sustainable business environment."
The FM indicated that the capital expenditure outlay for the upcoming year will increase by 11.1 percent to 11.11 lakh crore, building on the unprecedented tripling of the expenditures in the previous four years, which has had a huge multiplier effect on economic growth and employment creation. This amounts to 3.4 percent of GDP.
In order to improve passenger comfort, convenience, and safety, 40,000 standard train bogies would be upgraded to Vande Bharat, according to Railways FM Sitharaman. Major rail infrastructure initiatives, like Namo Bharat and Metro Rail, will be extended to additional cities.
The port connectivity corridor, the energy, mineral, and cement corridor, and the high traffic density corridor are the other three significant railway lines that were announced. Decongestion of the resulting heavy-traffic lanes will also aid in enhancing passenger train operations, resulting in increased travel speed and safety for passengers.
These three economic corridor initiatives, in conjunction with freight-only lanes, will lower logistical costs and boost GDP growth, according to Sitharaman.
"The FM said that about 40,000 more rail bogies will be converted to Vande Bharat coaches following the success of the Vande Bharat trains. According to Sanjay Moorjani, Research Analyst at SAMCO Securities, "this will further create job opportunities while reducing travel time as well as increasing tourism across the country."
Congestion on current lines, mostly in the country's east, can be eased by the creation of economic rail lanes tailored to certain commodities, according to CRISIL. Faster goods movement and turnaround times are encouraged by this, which could also help India cut its logistics costs from 12% of GDP and increase its competitiveness relative to its counterparts, particularly in manufacturing.
FM declared that nine crore women and eighty-three lakh SHGs (self-help groups) are changing the socio-economic landscape of rural areas via empowerment and independence. Almost one crore women have already benefited from their achievement by becoming "Lakhpati Didis." Encouraged by the outcome, the goal for "Lakhpati Didi" has been increased from 2 crore to 3 crore.
"The Lakhpati Didi Scheme has been a remarkable success, reaching 83 lakh self-help groups and benefiting 9 crore women, with the goal of empowering two crore women in villages. This project, which would provide ₹1 lakh per home for a total of one crore people, has the potential to greatly improve the economic standing of rural women. According to Veer Trivedi, Research Analyst at SAMCO Securities, "this empowerment not only boosts the rural economy but also increases the demand for microfinance from women and self-help groups, potentially reducing stress on asset quality issues."
Ten million households will be able to receive up to 300 units of free electricity per month through roof-top solarization. According to FM Nirmala Sitharaman, this plan reflects the Prime Minister's resolve on the historic day of the Shri Ram Mandir's dedication in Ayodhya. According to Sitharaman, householders will be able to save up to ₹15,000–18,000 a year by taking advantage of free solar electricity and selling the excess to distribution companies.
In an effort to reach the goal of "net zero" by 2070, the following actions were declared.
1. Funding for the viability gap will be given in order to utilize offshore wind energy potential up to a gigawatt in initial capacity.
2. By 2030, a 100 MT coal gasification and liquefaction capacity will be established. Additionally, this will lessen the need to import ammonia, methanol, and natural gas.
3. It will be necessary to gradually combine compressed biogas (CBG) into piped natural gas (PNG) for home use and compressed natural gas (CNG) for transportation.
4. To facilitate collecting, financial help will be given for the purchase of biomass aggregation equipment.
According to the finance minister, the government would boost infrastructure for EV manufacturing and charging in order to grow and fortify the EV ecosystem. Through payment security methods, a greater uptake of e-buses for public transport networks will be encouraged, she continued.
"With 6,586 stations registered by March 2023, the paucity of public charging stations is the primary obstacle to the adoption of electric and hybrid vehicles. The Indian government's 2024–25 Union Budget proposes a forward-thinking solution to address this issue. With a concentrated investment on increasing the number of charging stations, it seeks to significantly broaden and incentivize the ecosystem for electric vehicles. According to Kartik Narayan, CEO of Staffing, TeamLease Services, "This initiative is a cornerstone in transforming India's EV landscape, overcoming range anxiety, and promoting electric vehicles as a viable, sustainable transport solution for the future."
FM declared that governments would be urged to embark on a complete development of global branding and marketing strategies for famous tourist destinations. There will be a system of ratings based on how well-maintained the facilities and services are. States will be given long-term, interest-free loans to help fund these initiatives. On all of our islands, including Lakshadweep, projects pertaining to port connection, tourist infrastructure, and amenities will be undertaken. Additionally, this will aid in creating jobs, according to FM Sitharaman.
A golden period was marked by the $596 billion in FDI influx between 2014 and 2023. That amounts to twice the influx from 2005 to 2014. In keeping with the principle of "first develop India," the government is negotiating bilateral investment treaties with international partners to promote sustained foreign investment, the FM stated in her speech.
Businesses and people's lives are altering as a result of new era technologies and data. According to FM Sitharaman, they are also making it possible for new economic opportunities to arise and for everyone, even those at the "bottom of the pyramid," to receive high-quality services at reasonable costs.
She declared that a fifty-year interest-free loan will be used to establish a corpus of one lakh crore rupees. extended-term financing or refinancing with extended tenors and low or no interest rates will be made available by the corpus. The private sector will be encouraged to greatly increase research and innovation in sunrise domains as a result.
"We need to have programmes that combine the powers of our youth and technology," she stated.
The FM also announced the introduction of a new programme aimed at advancing "atmanirbharta" and bolstering deep-tech defensive technologies.
"The IT industry and emerging sectors can be considered as indispensable beneficiaries of the 50-year interest-free loan with a corpus of Rs. 1 lakh crore." In the upcoming ten years, the financing is expected to strengthen research and inventions, strengthening India's standing as a worldwide leader in technology, according to SKI Capital Director Manick Wadhwa.
Ayushman Finance Minister Sitharaman declared that all Anganwadi and Asha workers would now be covered by Bharat cover. She also mentioned that a single, all-inclusive plan will replace all maternity and child healthcare programmes.
Notwithstanding COVID-related obstacles, PM Awas Yojana (Grameen) implementation proceeded, and the center is almost at the three crore housing objective. According to Sitharaman, two crore more homes would be built over the course of the next five years to accommodate the demand brought on by the rise in the number of families.
"The Pradhan Mantri Awas Yojana (Urban) Mission, which was introduced on June 25, 2015, aims to guarantee housing for everyone. By March 2024, the government planned to build 3 crore pucca dwellings; the finance minister said in the address that they were getting closer to this target. A further commitment to building two crore more residences over the next five years is shown by this proposal. According to Veer Trivedi, research analyst at SAMCO Securities, "this increased focus on PMAY is expected to trigger increased investments and heightened activity in the construction sector, with multiplier effects on Housing Finance, Cement, Steel, and Paints industries, reflecting a significant positive impact across various sectors."
The goal of policy is to equip MSMEs with the skills they need to compete on a global scale, and supporting their expansion will be crucial. According to FM Sitharaman, the government would get the banking sector ready to satisfy the investment needs.
The creation of 3,000 new Industrial Training Institutes (ITIs), the goal of the Skill India Mission to train 1.4 crore youth, and the upskilling and reskilling of 54 lakh youth are all critical steps in supporting the PLI and Made in India initiatives. According to Kartik Narayan, CEO of Staffing at TeamLease Services, "This all-encompassing strategy is crucial to increasing the manufacturing sector's GDP contribution from 17 percent to 25 percent by 2047, thereby creating numerous job opportunities."
Agriculture and food processing FM declared that they will be increasing its efforts to provide value to the agriculture industry and increase farmers' income. 38 lakh farmers have benefited from the Pradhan Mantri Kisan Sampada Yojana, which has also created 10 lakh jobs. Formalisation of Micro Food Processing Enterprises under Pradhan Mantri Yojana has helped sixty thousand people and 2.4 lakh Self-Help Groups establish credit connections. In addition, there are several programmes aimed at lowering postharvest losses and raising incomes and productivity.
She said that in order to guarantee the industry grows more quickly, the government will encourage both public and private investment in post-harvest operations such as aggregation, contemporary storage, effective supply chains, primary and secondary processing, marketing, and branding.
- A fiscal deficit target of 5.1% of GDP for FY25.
- The FY24 budget deficit objective was changed from 5.9 percent of GDP to 5.8% of GDP.
- As of December, the fiscal deficit for the first nine months of FY24 was ₹9.82 lakh crore, or 55% of the yearly estimates.
₹11.1 lakh crore, an increase of 11.1 percent, is the capital expenditure for FY25.
- ₹30.80 lakh crore is the anticipated total expenditure for FY25. ₹44.90 lakh crore is the updated estimate of total spending for FY24.
- Strong economic formalization and growth momentum are likely to translate into revenue revenues for FY24, estimated at ₹30.03 lakh crore, exceeding the estimates made by the budget.
- ₹14.13 lakh crore is the estimated gross market borrowing for FY25; ₹11.75 lakh crore is the estimated net borrowing.
- The target for FY25 gross tax receipts is ₹26.02 lakh crore.
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